<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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VAXCEL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2830 58-2027283
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
154 TECHNOLOGY PARKWAY
NORCROSS, GEORGIA 30092
(770) 453-0195
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
PAUL J. WILSON III
PRESIDENT AND CHIEF EXECUTIVE OFFICER
VAXCEL, INC.
154 TECHNOLOGY PARKWAY
NORCROSS, GEORGIA 30092
(770) 453-0195
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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with copies to:
<TABLE>
<S> <C> <C>
GEORGE M. MAXWELL, JR. MARTYN D. GREENACRE DEBRA J. POUL
ALSTON & BIRD CHAIRMAN AND CHIEF EXECUTIVE OFFICER MORGAN, LEWIS & BOCKIUS LLP
ONE ATLANTIC CENTER ZYNAXIS, INC. 2000 ONE LOGAN SQUARE
1201 WEST PEACHTREE PHILADELPHIA, PENNSYLVANIA
STREET 371 PHOENIXVILLE PIKE 19103-6993
ATLANTA, GEORGIA
30309-3424 MALVERN, PENNSYLVANIA 19355 (215) 963-5280
(404) 881-7570 (610) 889-2202
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after the merger (the "Merger") described in this
Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock $0.001 par value.................. 1,807,719 $0.60 $1,092,870 $332
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</TABLE>
(1) This Registration Statement covers (i) the maximum number of shares of the
common stock of the Registrant ("Vaxcel Common Stock") which are expected to
be issued to holders of shares of common stock of Zynaxis, Inc. ("Zynaxis"),
$0.01 par value ("Zynaxis Common Stock"), and preferred stock of Zynaxis, no
par value ("Zynaxis Preferred Stock"), and holders of convertible promissory
notes of Zynaxis ("Zynaxis Notes") in connection with the Merger; (ii) the
maximum number of shares of Vaxcel Common Stock reserved for issuance under
the option plan of Zynaxis, the obligations under which will be assumed by
the Registrant upon consummation of the Merger, but which may be issued
prior to consummation of the Merger; (iii) the maximum number of shares of
Vaxcel Common Stock which may be issued to holders of warrants to purchase
Zynaxis Common Stock which may be exercised prior to the Merger; and (iv)
the maximum number of shares of Vaxcel Common Stock which may be issued to
holders of warrants to purchase Vaxcel Common Stock issued in connection
with the Merger.
(2) Estimated solely for purposes of calculating the registration fee and based,
pursuant to Rule 457(b)(2) under the Securities Act of 1933, as amended, on
one-third of the par value of the shares of Zynaxis Common Stock, of the
stated value of the shares of Zynaxis Preferred Stock, and of the principal
amount of Zynaxis Notes, to be exchanged in connection with the Merger, as
of December 31, 1996.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), SHALL
DETERMINE.
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<PAGE> 2
[LETTERHEAD OF ZYNAXIS]
February , 1997
To the Shareholders of Zynaxis, Inc.:
You are cordially invited to attend a Special Meeting of the Shareholders
(the "Special Meeting") of Zynaxis, Inc. ("Zynaxis") to be held at the main
office of Zynaxis located at 371 Phoenixville Pike, Malvern, Pennsylvania 19355,
at .M., local time, on March , 1997.
At the Special Meeting, you will be asked to consider and vote upon: (i) a
proposal to approve an Agreement and Plan of Merger and Contribution (the
"Agreement"), dated December 6, 1996, by and among Zynaxis, CytRx Corporation
("CytRx"), Vaxcel, Inc. ("Vaxcel"), a wholly-owned subsidiary of CytRx, and
Vaxcel Merger Subsidiary, Inc. ("Vaxcel Merger Sub"), a newly-formed,
wholly-owned subsidiary of Vaxcel, which provides for the merger (the "Merger")
of Vaxcel Merger Sub with and into Zynaxis, with the effect that Zynaxis, as the
surviving corporation resulting from the Merger, will be a wholly-owned
subsidiary of Vaxcel; (ii) a proposal to approve a plan of asset transfer for
the sale of substantially all of the assets of Zynaxis (the "Asset Sales") on
terms and conditions to be determined by the Board of Directors of Zynaxis; and
(iii) a proposal to approve an amendment (the "Charter Amendment") to the
Amended and Restated Articles of Incorporation, as amended ("Articles of
Amendment"), of Zynaxis to "opt out" of Subchapter 25E of the Pennsylvania
Business Corporation Law of 1988, as amended ("PBCL"). As a result of the
Merger, the former shareholders of Zynaxis will own approximately 12.5% of the
outstanding shares of common stock of Vaxcel, par value $.001 per share ("Vaxcel
Common Stock"), and CytRx will own the remaining approximately 87.5% of such
shares (assuming no exercise of any options or warrants with respect to Vaxcel
Common Stock).
Upon consummation of the Merger, (i) each share of common stock of Zynaxis,
par value $.01 per share ("Zynaxis Common Stock"), issued and outstanding
immediately prior to the effective time ("Effective Time") of the Merger
(excluding shares held by any Zynaxis company or any Vaxcel company, and
excluding shares held by shareholders who perfect their statutory dissenters'
rights under Subchapter 15D of the PBCL or statutory objection rights under
Subchapter 25E of the PBCL), will be exchanged for the right to receive a number
of shares of Vaxcel Common Stock equal to the Exchange Ratio (as defined in the
Agreement), estimated to be approximately .0948, with cash being paid in lieu of
any fractional shares, and (ii) each share of Series A convertible preferred
stock of Zynaxis, no par value ("Zynaxis Preferred Stock," and, together with
Zynaxis Common Stock, "Zynaxis Capital Stock") issued and outstanding
immediately prior to the Effective Time (excluding shares held by any Zynaxis
company or any Vaxcel company, and excluding shares held by shareholders who
perfect their statutory dissenters' rights under Subchapter 15D of the PBCL or
statutory objection rights under Subchapter 25E of the PBCL), will be exchanged
for the right to receive a number of shares of Vaxcel Common Stock equal to two
times the Exchange Ratio, with cash being paid in lieu of any fractional shares.
In addition, at the closing of the Merger, CytRx will contribute to Vaxcel the
Senior Credit Facility (as defined in the next paragraph) plus a cash payment
(the "Cash Payment") in an amount equal to the difference, as of the Effective
Time, between $4,000,000 and the sum of (i) the outstanding balance under the
Senior Credit Facility and (ii)(a) the Per Share Price (as defined in the
Agreement), estimated to be approximately $.2758, multiplied by (b) the number
of votes entitled to be cast by the holders of Zynaxis Capital Stock, if any,
who elect to exercise their statutory dissenters' rights under Subchapter 15D of
the PBCL or their statutory objection rights under Subchapter 25E of the PBCL in
excess of three percent of the votes that could be cast by all holders of
Zynaxis Capital Stock voting together as a class. In exchange for the
contribution of the Senior Credit Facility and the Cash Payment, Vaxcel will
deliver to CytRx: (i) a warrant to purchase shares of Vaxcel Common Stock (the
"CytRx Warrant") at an exercise price equal to one-half of the Per Share Price
multiplied by the Exchange Ratio which may be exercised if, and only if, CytRx
reasonably determines that Vaxcel's total assets and capital and surplus are
insufficient to
<PAGE> 3
satisfy the total assets and capital and surplus requirements for inclusion of
Vaxcel Common Stock on the Nasdaq SmallCap Market; (ii) 1,374,996 shares of
Vaxcel Common Stock; and (iii) that number of shares of Vaxcel Common Stock
equal to the product of the Exchange Ratio multiplied by the number of votes
entitled to be cast by the holders of Zynaxis Capital Stock, if any, who elect
to exercise their statutory dissenters' rights under Subchapter 15D of the PBCL
or their statutory objection rights under Subchapter 25E of the PBCL.
Simultaneously with the execution of the Agreement: (i) Zynaxis and CytRx
entered into a secured loan agreement, pursuant to which CytRx agreed to loan up
to $2,000,000 to Zynaxis on a secured basis (together with a related senior
secured note and certain security agreements, the "Senior Credit Facility");
(ii) Zynaxis and CytRx entered into a letter agreement ("Liquidation Agreement")
which provides for CytRx to serve as Zynaxis' agent in the Asset Sales; (iii)
Zynaxis, CytRx, Vaxcel, and the holders of all of the outstanding shares of
Zynaxis Preferred Stock, who also hold certain warrants to purchase Zynaxis
Common Stock ("Zynaxis Warrants"), entered into a certain agreement ("Preferred
Stock and Warrant Agreement"), conditioned upon the consummation of the Merger,
making certain agreements with respect to their rights, and converting the
Zynaxis Warrants, upon consummation of the Merger, into warrants for the
purchase of Vaxcel Common Stock; (iv) Zynaxis, CytRx, and Vaxcel entered into a
certain agreement ("Note Exchange Agreement") with Euclid Partners III, L.P. and
S.R. One, Ltd., who hold convertible notes ("Zynaxis Notes") issued by Zynaxis,
conditioned upon the consummation of the Merger, converting the Zynaxis Notes,
upon consummation of the Merger, into the right to receive shares of Vaxcel
Common Stock; (v) CytRx and certain holders of Zynaxis Capital Stock entered
into shareholder voting agreements (each a "Shareholder Voting Agreement")
pursuant to which each of such shareholders granted CytRx an irrevocable proxy
to vote shares of Zynaxis Capital Stock held by such shareholders in favor of
the Agreement and the Merger contemplated thereby, the Asset Sales, and the
Charter Amendment; and (vi) Vaxcel and Zynaxis entered into a technology
development agreement ("Technology Development Agreement") concerning the
development, by Vaxcel, of certain technologies owned by or licensed to Zynaxis.
Each of the Senior Credit Facility, the Liquidation Agreement, the Preferred
Stock and Warrant Agreement, the Note Exchange Agreement, the Shareholder Voting
Agreements, and the Technology Development Agreement are incorporated into the
Agreement as exhibits thereto.
At the Special Meeting, you also will be asked to consider and vote upon a
proposal to approve the Asset Sales. Pursuant to the Liquidation Agreement and
subject to shareholder approval, CytRx will serve as Zynaxis' agent and assist
Zynaxis in conducting the Asset Sales. The approval of the Asset Sales by the
shareholders of Zynaxis is a condition to consummation of the Merger.
At the Special Meeting, you also will be asked to consider and vote upon a
proposal to approve the Charter Amendment. Subchapter 25E of the PBCL, relating
to control transactions, provides that if any person or group acquires 20% or
more of the voting power of a covered corporation, the remaining shareholders
may demand from such person or group the "fair value," as defined in the
statute, of their shares, including a proportionate amount of any control
premium. Pursuant to Section 2541(a)(4) of the PBCL, the articles of
incorporation of a Pennsylvania corporation can explicitly provide that
Subchapter 25E is not applicable by means of an amendment adopted by the
shareholders of such corporation prior to a control transaction. The adoption of
the Charter Amendment amending the Articles of Incorporation and making
Subchapter 25E inapplicable to the Merger is a condition to consummation of the
Merger.
At the Special Meeting, the Charter Amendment will be the first matter put
before the shareholders for consideration and for a vote. If the Charter
Amendment is approved by the shareholders, the Special Meeting will be adjourned
pending the filing of the articles of amendment amending Zynaxis' Amended and
Restated Articles of Incorporation, as amended ("Articles of Amendment"),
reflecting the Charter Amendment, with the Department of State of the
Commonwealth of Pennsylvania. After the filing of the Articles of Amendment and
the effectiveness of the Charter Amendment, the Special Meeting will be
reconvened to consider and vote upon the Agreement and the Merger contemplated
thereby, the Asset Sales, and such other business as may properly come before
the Special Meeting.
Enclosed are the (i) Notice of Special Meeting, (ii) Proxy
Statement/Prospectus, (iii) Proxy for the Special Meeting, (iv) Zynaxis' Annual
Report to Shareholders for the year ended December 31, 1995, and
2
<PAGE> 4
(v) Zynaxis' Quarterly Report on Form 10-Q for the nine months ended September
30, 1996. The Proxy Statement/Prospectus describes in more detail the Agreement
and the proposed Merger (including a description of the conditions to
consummation of the Merger and the rights of Zynaxis shareholders), the proposed
Asset Sales, and the proposed Charter Amendment. Please read these materials
carefully and consider thoughtfully the information set forth in them.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AGREEMENT AND THE
MERGER CONTEMPLATED THEREBY, THE ASSET SALES, AND THE CHARTER AMENDMENT AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE AGREEMENT AND THE
MERGER CONTEMPLATED THEREBY, THE ASSET SALES, AND THE CHARTER AMENDMENT.
THE BOARD OF DIRECTORS BELIEVES THAT, IF THE MERGER IS NOT CONSUMMATED, IT
IS HIGHLY PROBABLE THAT ZYNAXIS WILL CEASE TO EXIST AS A GOING CONCERN. THE
BOARD OF DIRECTORS BELIEVES THAT, IF THE MERGER IS NOT CONSUMMATED, ZYNAXIS MAY
NOT HAVE CASH SUFFICIENT TO FUND ITS ONGOING OPERATIONS AND THAT THE MERGER
REPRESENTS THE ONLY OPPORTUNITY FOR THE ZYNAXIS SHAREHOLDERS TO PARTICIPATE IN
THE DEVELOPMENT AND COMMERCIALIZATION OF THE ZYNAXIS VACCINE DELIVERY
TECHNOLOGIES. IN ADDITION, IF THE MERGER IS NOT CONSUMMATED, THE BOARD OF
DIRECTORS BELIEVES THAT ZYNAXIS MAY NOT BE ABLE TO PAY THE OUTSTANDING BALANCE
UNDER THE SENIOR CREDIT FACILITY WHEN IT COMES DUE. IF ZYNAXIS DEFAULTS UNDER
THE SENIOR CREDIT FACILITY, CYTRX MAY EXERCISE ITS RIGHTS AS A SECURED CREDITOR
WITH RESPECT TO CERTAIN ASSETS OF ZYNAXIS, INCLUDING, BUT NOT LIMITED TO,
FORECLOSING ON ZYNAXIS' RIGHTS IN ITS VACCINE DELIVERY TECHNOLOGIES.
Approval of each of these matters will require the affirmative vote of: (i)
a majority of the votes cast, whether in person or by proxy, by all holders of
Zynaxis Preferred Stock (voting on an as converted basis) and by all holders of
Zynaxis Common Stock, entitled to vote and voting together as a class; and (ii)
a majority of the votes cast, whether in person or by proxy, by all holders of
Zynaxis Preferred Stock, entitled to vote and voting as a separate class.
Accordingly, whether or not you plan to attend the Special Meeting, you are
urged to complete, sign, and return promptly the enclosed proxy card. If you
attend the Special Meeting, even if you previously have returned your proxy
card, you may withdraw your proxy and vote in person if you wish. The proposed
Merger with Vaxcel, the Asset Sales, and the Charter Amendment are significant
steps for Zynaxis and your vote on these matters is of great importance.
ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR APPROVAL OF THE
AGREEMENT AND THE MERGER CONTEMPLATED THEREBY, THE ASSET SALES, AND THE CHARTER
AMENDMENT BY MARKING THE ENCLOSED PROXY CARD "FOR" ITEMS ONE, TWO, AND THREE,
RESPECTIVELY.
We look forward to seeing you at the Special Meeting.
Sincerely,
MARTYN D. GREENACRE
President and Chief Executive Officer
3
<PAGE> 5
ZYNAXIS, INC.
371 PHOENIXVILLE PIKE
MALVERN, PENNSYLVANIA 19355
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AT .M. ON MARCH , 1997
------------------------
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders (the
"Special Meeting") of Zynaxis, Inc. ("Zynaxis") will be held at 371 Phoenixville
Pike, Malvern, Pennsylvania 19355, on March , 1997, at .M., local time,
for the following purposes.
1. CHARTER AMENDMENT. To consider and vote upon a proposal to approve an
amendment (the "Charter Amendment") to the Amended and Restated Articles of
Incorporation, as amended (the "Articles of Incorporation"), of Zynaxis to make
Subchapter 25E of the Pennsylvania Business Corporation Law of 1988, as amended
("PBCL"), inapplicable to Zynaxis. Subchapter 25E, relating to control
transactions, provides that if any person or group acquires 20% or more of the
voting power of a covered corporation, the remaining shareholders may demand
from such person or group the "fair value," as defined in the statute, of their
shares, including a proportionate amount of any control premium. Pursuant to
Section 2541(a)(4) of the PBCL, the articles of incorporation of a Pennsylvania
corporation can explicitly provide that Subchapter 25E is not applicable by an
amendment adopted by the shareholders of such corporation prior to a control
transaction. The adoption of the Charter Amendment amending the Articles of
Incorporation to make Subchapter 25E inapplicable to the Merger (as defined
below) is a condition to consummation of the Merger. A copy of the Charter
Amendment is set forth in Appendix C to the accompanying Proxy
Statement/Prospectus and is hereby incorporated by reference herein.
2. MERGER. To consider and vote upon a proposal to approve an Agreement
and Plan of Merger and Contribution (the "Agreement"), dated December 6, 1996,
by and among Zynaxis, CytRx Corporation ("CytRx"), a Delaware corporation,
Vaxcel, Inc. ("Vaxcel"), a Delaware corporation and a wholly-owned subsidiary of
CytRx, and Vaxcel Merger Subsidiary, Inc. ("Vaxcel Merger Sub"), a Georgia
corporation and a newly-formed, wholly-owned subsidiary of Vaxcel, which
provides (i) for the merger (the "Merger") of Vaxcel Merger Sub with and into
Zynaxis, with the effect that Zynaxis will be the surviving corporation
resulting from the Merger, and will continue to conduct its business and
operations as a wholly-owned subsidiary of Vaxcel; (ii) upon consummation of the
Merger, (a) each share of common stock of Zynaxis, par value $.01 per share
("Zynaxis Common Stock"), issued and outstanding immediately prior to the
effective time ("Effective Time") of the Merger (excluding shares held by any
Zynaxis company or any Vaxcel company, and excluding shares held by shareholders
who perfect their statutory dissenters' rights under Subchapter 15D of the PBCL
or statutory objection rights under Subchapter 25E of the PBCL), will be
exchanged for the right to receive a number of shares of common stock of Vaxcel,
par value $.001 per share ("Vaxcel Common Stock"), equal to the Exchange Ratio
(as defined in the Agreement), estimated to be approximately .0948, with cash
being paid in lieu of any fractional shares, and (b) each share of Series A
convertible preferred stock of Zynaxis, no par value ("Zynaxis Preferred Stock,"
and, together with Zynaxis Common Stock, "Zynaxis Capital Stock"), issued and
outstanding immediately prior to the Effective Time (excluding shares held by
any Zynaxis company or any Vaxcel company, and excluding shares held by
shareholders who perfect their statutory dissenters' rights under Subchapter 15D
of the PBCL or statutory objection rights under Subchapter 25E of the PBCL) will
be exchanged for the right to receive a number of shares of Vaxcel Common Stock
equal to two times the Exchange Ratio, with cash being paid in lieu of any
fractional shares. In addition, at the closing of the Merger, CytRx will
contribute to Vaxcel the Senior Credit Facility (as defined below) plus a cash
payment (the "Cash Payment") in an amount equal to the difference, as of the
Effective Time, between $4,000,000 and the sum of (i) the outstanding balance
under the Senior Credit Facility and (ii)(a) the Per Share Price (as defined in
the Agreement), estimated to be approximately $.2758, multiplied by (b) the
number of votes entitled to be cast by the holders of Zynaxis Capital Stock, if
any, who elect to exercise their statutory dissenters' rights under Subchapter
15D of the PBCL or their
<PAGE> 6
statutory objection rights under Subchapter 25E of the PBCL in excess of three
percent of the votes that could be cast by all holders of Zynaxis Capital Stock
voting together as a class. In exchange for the contribution of the Senior
Credit Facility and the Cash Payment, Vaxcel will deliver to CytRx: (i) a
warrant to purchase shares of Vaxcel Common Stock (the "CytRx Warrant") at an
exercise price equal to one-half of the Per Share Price multiplied by the
Exchange Ratio which may be exercised if, and only if, CytRx reasonably
determines that Vaxcel's total assets and capital and surplus are insufficient
to satisfy the total assets and capital and surplus requirements for inclusion
of the Vaxcel Common Stock in the Nasdaq SmallCap Market; (ii) 1,374,996 shares
of Vaxcel Common Stock; and (iii) that number of shares of Vaxcel Common Stock
equal to the product of the Exchange Ratio multiplied by the number of votes
entitled to be cast by the holders of Zynaxis Capital Stock, if any, who elect
to exercise their statutory dissenters' rights under Subchapter 15D of the PBCL
or their statutory objection rights under Subchapter 25E of the PBCL, all as
more fully described in the accompanying Proxy Statement/Prospectus. As a result
of the Merger, the former shareholders of Zynaxis will own approximately 12.5%
of the issued and outstanding shares of Vaxcel Common Stock, and CytRx will own
approximately 87.5% of such shares (assuming no exercise of any options or
warrants with respect to Vaxcel Common Stock). A copy of the Agreement is set
forth in Appendix A to the accompanying Proxy Statement/Prospectus and is hereby
incorporated herein by reference.
Simultaneously with the execution of the Agreement: (i) Zynaxis and CytRx
entered into a secured loan agreement, pursuant to which CytRx agreed to loan up
to $2,000,000 to Zynaxis on a secured basis (together with a related senior
secured note and certain security agreements, the "Senior Credit Facility");
(ii) Zynaxis and CytRx entered into a letter agreement ("Liquidation Agreement")
which provides for CytRx to serve as Zynaxis' agent in the sale of substantially
all of the assets of Zynaxis; (iii) Zynaxis, CytRx, Vaxcel, and the holders of
all of the outstanding shares of Zynaxis Preferred Stock, who also hold certain
warrants to purchase Zynaxis Common Stock ("Zynaxis Warrants"), entered into a
certain agreement ("Preferred Stock and Warrant Agreement"), conditioned upon
the consummation of the Merger, making certain agreements with respect to their
rights, and converting the Zynaxis Warrants, upon consummation of the Merger,
into warrants for the purchase of Vaxcel Common Stock; (iv) Zynaxis, CytRx and
Vaxcel, entered into a certain agreement ("Note Exchange Agreement") with Euclid
Partners III, L.P. and S.R. One, Ltd., who hold convertible notes ("Zynaxis
Notes") issued by Zynaxis, conditioned upon the consummation of the Merger,
converting the Zynaxis Notes, upon consummation of the Merger, into the right to
receive shares of Vaxcel Common Stock; (v) CytRx and certain holders of Zynaxis
Capital Stock entered into shareholder voting agreements (each a "Shareholder
Voting Agreement") pursuant to which each of such shareholders granted CytRx an
irrevocable proxy to vote shares of Zynaxis Capital Stock held by such
shareholders in favor of the Agreement and the Merger contemplated thereby, the
Asset Sales (as defined below), and the Charter Amendment; and (vi) Vaxcel and
Zynaxis entered into a technology development agreement ("Technology Development
Agreement") concerning the development, by Vaxcel, of certain technologies owned
by or licensed to Zynaxis. Each of the Senior Credit Facility, the Liquidation
Agreement, the Preferred Stock and Warrant Agreement, the Note Exchange
Agreement, the Shareholder Voting Agreements, and the Technology Development
Agreement are incorporated into the Agreement as exhibits thereto.
3. ASSET SALES. To consider and vote upon a proposal to approve the sale
of substantially all of the assets of Zynaxis ("Asset Sales") on terms and
conditions to be determined by the Zynaxis Board of Directors. Pursuant to the
Liquidation Agreement and subject to shareholder approval, CytRx will serve as
Zynaxis' agent and assist Zynaxis in conducting the Asset Sales. The approval of
the Asset Sales by the shareholders of Zynaxis is a condition to consummation of
the Merger, all as more fully described in the accompanying Proxy
Statement/Prospectus. A copy of the Liquidation Agreement is set forth in
Appendix B to the accompanying Proxy Statement/Prospectus and is hereby
incorporated herein by reference.
4. OTHER BUSINESS. To transact such other business as may come properly
before the Special Meeting or any adjournments or postponements of the Special
Meeting.
NOTICE OF APPRAISAL RIGHTS. If Proposal 2 is approved and the Merger
contemplated thereby is consummated, or if Proposal 3 is approved and the Asset
Sales contemplated thereby are consummated, each holder of shares of Zynaxis
Capital Stock would have the right to demand appraisal of such holder's shares
of
2
<PAGE> 7
Zynaxis Capital Stock and would be entitled to the rights and remedies of
Subchapter 15D of the PBCL. The right of any such shareholder to any such rights
and remedies is contingent upon consummation of the Merger or the Asset Sales,
as the case may be. In addition, the right of any such shareholder to such
rights and remedies is contingent upon strict compliance with the requirements
set forth in Subchapter 15D of the PBCL, the full text of which is attached as
Appendix D to the accompanying Proxy Statement/Prospectus. For a summary of the
requirements of Subchapter 15D of the PBCL, see "Description of the
Transaction -- Dissenters' Rights" in the accompanying Proxy
Statement/Prospectus.
NOTICE OF OBJECTION RIGHTS. If Proposal 1 is not approved but Proposal 2
is approved, each holder of shares of Zynaxis Capital Stock who objects to the
Merger would have the right to demand "fair value" for such holder's shares of
Zynaxis Capital Stock and would be entitled to the rights and remedies of
Subchapter 25E of the PBCL. The right to demand "fair value" is contingent on
the consummation of the Merger. Such written demand must state the number and
class or series, if any, of the Zynaxis Capital Stock owned with respect to
which the demand is made and must be made on CytRx within twenty days of the
date of this Notice.
The minimum value an objecting holder of Zynaxis Capital Stock would be
able to receive under Subchapter 25E of the PBCL equals the highest price paid
per share by CytRx within the 90-day period ending on and including the date on
which CytRx acquires voting power over shares of Zynaxis Capital Stock which
entitle CytRx to cast 20% or more of the votes that all shareholders would be
entitled to cast in an election of directors of Zynaxis, plus to the extent not
reflected in such price paid, an increment representing any value, including,
without limitation, any proportion of any value payable for control of Zynaxis.
CytRx believes that the date of the Merger would be the last day of the 90-day
period. If a holder of Zynaxis Capital Stock believes the fair value to be
higher than that described above, Subchapter 25E of the PBCL entitles such
holder to utilize the appraisal procedure established by the Court of Common
Pleas of Chester County, Court House, West Chester, PA 19380 pursuant to a
petition to be filed by CytRx requesting such determination.
The right of any such shareholder to any such rights and remedies is
contingent upon the consummation of the Merger. In addition, the right of any
such shareholder to such rights and remedies is contingent upon strict
compliance with the requirements of Subchapter 25E of the PBCL, the full text of
which is attached hereto as Appendix E to the accompanying Proxy
Statement/Prospectus. For a summary of the requirements of Subchapter 25E of the
PBCL, see "Description of Transaction -- Objection Rights Under Subchapter 25E
of the PBCL" in the accompanying Proxy Statement/Prospectus.
At the Special Meeting, the Charter Amendment will be the first matter put
before the shareholders for consideration and for a vote. If the Charter
Amendment is approved by the shareholders, the Special Meeting will be adjourned
pending the filing of the articles of amendment ("Articles of Amendment")
reflecting the Charter Amendment and amending Zynaxis' Articles of Incorporation
with the Department of State of the Commonwealth of Pennsylvania. After the
filing of the Articles of Amendment and the effectiveness of the Charter
Amendment, the Special Meeting will be reconvened to consider and vote upon the
Agreement and the Merger contemplated thereby, the Asset Sales, and such other
business as may properly come before the Special Meeting.
Only shareholders of record at the close of business on February , 1997
will be entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof. Approval of each of the Agreement and the
Merger contemplated thereby, the Asset Sales, and the Charter Amendment will
require the affirmative vote of: (i) a majority of the votes cast, whether in
person or by proxy, by all holders of Zynaxis Preferred Stock (voting on an as
converted basis) and by all holders of Zynaxis Common Stock, entitled to vote
and voting together as a class; and (ii) a majority of the votes cast, whether
in person or by proxy, by all holders of Zynaxis Preferred Stock, entitled to
vote and voting as a separate class.
THE BOARD OF DIRECTORS OF ZYNAXIS (THE "ZYNAXIS BOARD") UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT AND THE MERGER
CONTEMPLATED THEREBY, THE ASSET SALES, AND THE CHARTER AMENDMENT.
3
<PAGE> 8
THE ZYNAXIS BOARD BELIEVES THAT, IF THE MERGER IS NOT CONSUMMATED, IT IS
HIGHLY PROBABLE THAT ZYNAXIS WILL CEASE TO EXIST AS A GOING CONCERN. THE ZYNAXIS
BOARD BELIEVES THAT, IF THE MERGER IS NOT CONSUMMATED, ZYNAXIS MAY NOT HAVE CASH
SUFFICIENT TO FUND ITS ONGOING OPERATIONS AND THAT THE MERGER REPRESENTS THE
ONLY OPPORTUNITY FOR THE ZYNAXIS SHAREHOLDERS TO PARTICIPATE IN THE DEVELOPMENT
AND COMMERCIALIZATION OF THE ZYNAXIS VACCINE DELIVERY TECHNOLOGIES. IN ADDITION,
IF THE MERGER IS NOT CONSUMMATED, THE ZYNAXIS BOARD BELIEVES THAT ZYNAXIS MAY
NOT BE ABLE TO PAY THE OUTSTANDING BALANCE UNDER THE SENIOR CREDIT FACILITY WHEN
IT COMES DUE. IF ZYNAXIS DEFAULTS UNDER THE SENIOR CREDIT FACILITY, CYTRX MAY
EXERCISE ITS RIGHTS AS A SECURED CREDITOR WITH RESPECT TO CERTAIN ASSETS OF
ZYNAXIS, INCLUDING, BUT NOT LIMITED TO, FORECLOSING ON ZYNAXIS' RIGHTS IN ITS
VACCINE DELIVERY TECHNOLOGIES.
By Order of the Board of Directors
MICHAEL A. CHRISTIE
Secretary
Malvern, Pennsylvania
February , 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE,
AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PAID RETURN ENVELOPE IN ORDER TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE SPECIAL MEETING.
4
<PAGE> 9
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS
[VAXCEL, INC. LOGO]
AN ESTIMATED 1,807,719 SHARES
COMMON STOCK, $0.001 PAR VALUE
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS OF
ZYNAXIS, INC.
This Prospectus of Vaxcel, Inc. ("Vaxcel"), a corporation organized and
existing under the laws of the State of Delaware, relates to up to 1,807,719
shares of common stock, $0.001 par value, of Vaxcel ("Vaxcel Common Stock"),
including shares subject to assumed options and warrants, which are issuable to
the shareholders and certain holders of convertible promissory notes of Zynaxis,
Inc. ("Zynaxis"), a corporation organized and existing under the laws of the
Commonwealth of Pennsylvania, upon consummation of the proposed merger (the
"Merger") described herein by which Vaxcel Merger Subsidiary, Inc. ("Vaxcel
Merger Sub"), a corporation organized and existing under the laws of the State
of Georgia and a newly formed, wholly owned subsidiary of Vaxcel, will merge
with and into Zynaxis pursuant to the terms of the Agreement and Plan of Merger
and Contribution, dated as of December 6, 1996 (the "Agreement"), by and among
Vaxcel, CytRx Corporation ("CytRx"), a corporation organized and existing under
the laws of the State of Delaware and the sole shareholder of Vaxcel, Vaxcel
Merger Sub, and Zynaxis, with the effect that Zynaxis will be the surviving
corporation resulting from the Merger, and will continue to conduct its business
and operations as a wholly owned subsidiary of Vaxcel. As a result of the
Merger, the former shareholders of Zynaxis will own approximately 12.5% of the
issued and outstanding shares of Vaxcel Common Stock, and CytRx will own
approximately 87.5% of such shares (assuming no exercise of any options or
warrants to purchase Vaxcel Common Stock).
This Prospectus also serves as a Proxy Statement of Zynaxis, and is being
furnished to the shareholders of Zynaxis in connection with the solicitation of
proxies by the Board of Directors of Zynaxis ("Zynaxis Board") for use at its
special meeting of shareholders (including any adjournment or postponement
thereof, the "Special Meeting"), to be held on March , 1997, to consider and
vote upon: (i) the Agreement and the Merger contemplated thereby; (ii) a plan of
asset transfer for the sale of substantially all of the assets of Zynaxis
("Asset Sales") on terms and conditions to be determined by the Zynaxis Board;
and (iii) an amendment (the "Charter Amendment") to the Amended and Restated
Articles of Incorporation, as amended, ("Articles of Incorporation") of Zynaxis
to make Subchapter 25E of the Pennsylvania Business Corporation Law of 1988, as
amended ("PBCL") inapplicable to Zynaxis. This Proxy Statement/Prospectus
("Proxy Statement") and related materials enclosed herewith are being mailed to
shareholders of Zynaxis on or about February , 1997.
Pursuant to the Agreement, upon consummation of the Merger: (i) each share
of $0.01 par value common stock of Zynaxis ("Zynaxis Common Stock") issued and
outstanding immediately prior to the Effective Time (excluding shares held by
any Zynaxis company or any Vaxcel company, and excluding shares held by
shareholders who perfect their statutory dissenters' rights under Subchapter 15D
of the PBCL or statutory objection rights under Subchapter 25E of the PBCL) will
be exchanged for the right to receive a number of shares of Vaxcel Common Stock
equal to the Exchange Ratio (as defined in the Agreement), estimated to be
approximately .0948, with cash being paid in lieu of issuing fractional shares;
(ii) each share of no par value Series A convertible preferred stock of Zynaxis
("Zynaxis Preferred Stock," and, together with Zynaxis Common Stock, "Zynaxis
Capital Stock") issued and outstanding immediately prior to the Effective Time
(excluding shares held by any Zynaxis company or any Vaxcel company, and
excluding shares held by shareholders who perfect their statutory dissenters'
rights under Subchapter 15D of the PBCL or statutory objection rights under
Subchapter 25E of the PBCL) will be exchanged for the right to receive a number
of shares of Vaxcel Common Stock equal to two times the Exchange Ratio, with
cash being paid in lieu of issuing fractional shares; and (iii) in exchange for
the contribution to Vaxcel of the Senior Credit Facility (as defined below), and
a Cash Payment (as defined in the Agreement). CytRx will receive (a) a warrant
to purchase shares of Vaxcel Common Stock ("CytRx Warrant") at an exercise price
equal to one-half of the Per Share Price multiplied by the Exchange Ratio which
may be exercised if, and only if, CytRx reasonably determines that Vaxcel's
total assets and capital and surplus are insufficient to satisfy the total
assets and capital and surplus requirements for inclusion of the Vaxcel Common
Stock in the Nasdaq SmallCap Market, (b) 1,374,996 shares of Vaxcel Common
Stock, and (c) a number of shares of Vaxcel Common Stock equal to the product of
the Exchange Ratio times the number of votes entitled to be cast by the holders
of Zynaxis Capital Stock, if any, who elect to exercise their statutory
dissenters' rights under Subchapter 15D of the PBCL or their statutory objection
rights under Subchapter 25E of the PBCL; and (iv) Vaxcel will assume the
obligations of Zynaxis under the Zynaxis, Inc. Amended and Restated 1989 Stock
Option Plan and various other option agreements and adopt substitute plans and
agreements where appropriate.
(Cover continued on following page)
IN EVALUATING THE MERGER, ZYNAXIS SHAREHOLDERS SHOULD CAREFULLY CONSIDER
THE FACTORS DESCRIBED IN "RISK FACTORS" BEGINNING ON PAGE 13.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROXY STATEMENT IS FEBRUARY , 1997.
<PAGE> 10
(Continued from previous page)
Simultaneously with the execution of the Agreement: (i) Zynaxis and CytRx
entered into a secured loan agreement, pursuant to which CytRx agreed to loan up
to $2,000,000 to Zynaxis on a secured basis (together with a senior secured note
and certain security agreements, the "Senior Credit Facility"); (ii) Zynaxis and
CytRx entered into a letter agreement (the "Liquidation Agreement") which
provides for CytRx to serve as Zynaxis' agent and assist Zynaxis in conducting
the Asset Sales prior to the Merger; (iii) Zynaxis, CytRx, Vaxcel, and the
holders of all of the outstanding shares of Zynaxis Preferred Stock, who also
hold certain warrants to purchase Zynaxis Common Stock ("Zynaxis Warrants"),
entered into a certain agreement ("Preferred Stock and Warrant Agreement"),
conditioned upon the consummation of the Merger, making certain agreements with
respect to their rights, and converting the Zynaxis Warrants, upon consummation
of the Merger, into warrants for the purchase of Vaxcel Common Stock ("Vaxcel
Warrants"); (iv) Zynaxis, CytRx, and Vaxcel entered into a certain agreement
("Note Exchange Agreement") with Euclid Partners III, L.P. and S.R. One, Ltd.,
who hold convertible notes ("Zynaxis Notes") issued by Zynaxis, conditioned upon
the consummation of the Merger, converting the Zynaxis Notes, upon consummation
of the Merger, into the right to receive shares of Vaxcel Common Stock; (v)
CytRx and certain holders of Zynaxis Capital Stock entered into shareholder
voting agreements (each a "Shareholder Voting Agreement") pursuant to which each
of such shareholders granted CytRx an irrevocable proxy to vote shares of
Zynaxis Common Stock held by such shareholder in favor of the Agreement and the
Merger contemplated thereby, the Asset Sales, and the Charter Amendment; and
(vi) Vaxcel and Zynaxis entered into a technology development agreement
("Technology Development Agreement") concerning the development, by Vaxcel, of
certain technologies owned by or licensed to Zynaxis. Each of the Senior Credit
Facility, the Liquidation Agreement, the Preferred Stock and Warrant Agreement,
the Note Exchange Agreement, the Shareholder Voting Agreements, and the
Technology Development Agreement (collectively, the "Transaction Documents") are
incorporated into the Agreement as exhibits thereto.
At the Special Meeting, the Charter Amendment will be the first matter put
before the shareholders for consideration and for a vote. If the Charter
Amendment is approved by the shareholders, the Special Meeting will be adjourned
pending the filing of the articles of amendment amending Zynaxis' Amended and
Restated Articles of Incorporation, as amended ("Articles of Amendment"),
reflecting the Charter Amendment, with the Department of State of the
Commonwealth of Pennsylvania. After the filing of the Articles of Amendment and
the effectiveness of the Charter Amendment, the Special Meeting will be
reconvened to consider and vote upon the Agreement and the Merger contemplated
thereby, the Asset Sales, and such other business as may properly come before
the Special Meeting. If the shareholders do not approve the Charter Amendment,
the Special Meeting will not be adjourned and the shareholders will be asked to
consider and vote upon the Agreement and the Merger contemplated thereby, the
Asset Sales, and such other business as may properly come before the Special
Meeting.
Approval of the Agreement and the Merger contemplated thereby, the Asset
Sales, and the Charter Amendment will require the affirmative vote of: (i) a
majority of the votes cast, whether in person or by proxy, by all holders of
Zynaxis Preferred Stock (voting on an as converted basis) and by the holders of
Zynaxis Common Stock, entitled to vote and voting together as a class; and (ii)
a majority of the votes cast, whether in person or by proxy, by all holders of
Zynaxis Preferred Stock, entitled to vote and voting as a separate class.
Holders of Zynaxis Common Stock are entitled to one vote for each share of
Zynaxis Common Stock held. When voting together as a class with holders of
Zynaxis Common Stock, holders of Zynaxis Preferred Stock are entitled to vote on
an as converted basis and are, therefore, entitled to two votes for each share
of Zynaxis Preferred Stock held.
The shares of Vaxcel Common Stock issuable to CytRx pursuant to the
Agreement, the CytRx Warrant issuable to CytRx pursuant to the Agreement, the
Vaxcel Warrants issuable to certain holders of Zynaxis Warrants pursuant to the
Preferred Stock and Warrant Agreement, and the warrants to purchase Vaxcel
Common Stock ("Vaxcel Non-Financing Warrants") issuable to certain holders of
other warrants to purchase Zynaxis Common Stock ("Zynaxis Non-Financing
Warrants") pursuant to the Agreement are not being registered pursuant to the
Registration Statement (as defined below) of which this Proxy Statement is a
part. These securities are being concurrently privately placed with CytRx and
the holders of Zynaxis Warrants and Zynaxis Non-Financing Warrants in
transactions exempt from the registration requirements of the Securities Act
pursuant to the exemptions provided in Section 4(2) thereof.
The Registration Statement of which this Proxy Statement is a part, also
registers for resale: (i) the shares of Vaxcel Common Stock issued by Vaxcel
hereunder to any persons who may be deemed to be "affiliates" of Zynaxis within
the meaning of Rule 145 of the Securities Act of 1933, as amended (the
"Securities Act"); (ii) the shares of Vaxcel Common Stock issued by Vaxcel
hereunder to certain shareholders of Zynaxis who have entered into the
Shareholder Voting Agreements; (iii) the shares of Vaxcel Common Stock issuable
upon the exercise of Vaxcel Warrants issued by Vaxcel pursuant to the Preferred
Stock and Warrant Agreement to holders of Zynaxis Warrants in exchange for such
Zynaxis Warrants; and (iv) the shares of Vaxcel Common Stock issuable upon the
exercise of Vaxcel Non-Financing Warrants by certain holders of Zynaxis'
Non-Financing Warrants assumed by Vaxcel pursuant to the Agreement (such
"persons," "shareholders," and "holders" being collectively, the "Selling
Shareholders"). Such shares of Vaxcel Common Stock registered for resale
pursuant to the Registration Statement are referred to herein as the "Resale
Shares." The Selling Shareholders have not advised Vaxcel of any specific plans
for the distribution of the Resale Shares covered by this Proxy Statement, but
it is anticipated that the Resale Shares will be offered for sale under this
Proxy Statement from time to time primarily in transactions (which may include
block transactions) on the Nasdaq SmallCap Market, in negotiated transactions,
through the writing of options on the shares, or any combination of these and
other methods of sale, at prices related to prevailing market prices or at
negotiated prices. The Selling Shareholders may sell their shares directly or
through agents, dealers or underwriters. The Selling Shareholders may sell some,
all, or none of their shares offered hereby. Vaxcel will not receive any
proceeds from the sale of the Resale Shares by the Selling Shareholders. Vaxcel
and Zynaxis have agreed to bear all expenses (other than underwriting discounts
and selling commissions, and fees and expenses of counsel and other advisors to
the Selling Shareholders) in connection with the registration of the shares
being offered by the Selling Shareholders. See "Selling Shareholders of Zynaxis"
and "Plan of Distribution."
Each holder of shares of Zynaxis Capital Stock has the right to dissent from
the Merger and the Asset Sales, and to demand appraisal and payment of the fair
value of such holder's shares of Zynaxis Capital Stock if the Merger or the
Asset Sales, as the case may be, are approved and consummated. The right of any
such shareholder to such rights and remedies is contingent upon strict
compliance with the requirements set forth in Subchapter 15D of the PBCL, the
full text of which is attached as Appendix D hereto. A shareholder of Zynaxis
who wishes to dissent from the Merger or the Asset Sales, as the case may be,
must not vote any shares of Zynaxis Capital Stock in favor of the Merger or the
Asset Sales, as the case may be. See "Description of the
Transaction -- Dissenters' Rights."
If the Charter Amendment is not approved, each holder of shares of Zynaxis
Capital Stock will have the right to object to the Merger and the right to
receive cash for each of such holder's shares of Zynaxis Capital Stock in an
amount equal to the "fair value" of each share of Zynaxis Capital Stock as of
the date of consummation of the Merger. The right of any such shareholder to
such rights and remedies is contingent upon the consummation of the Merger and
upon strict compliance with the requirements set forth in Subchapter 25E of the
PBCL, the full text of which is attached as Appendix E hereto. See "Description
of the Transaction -- Objection Rights Under Subchapter 25E of the PBCL."
2
<PAGE> 11
AVAILABLE INFORMATION
Zynaxis is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, is
required to file reports, proxy and information statements, and other
information with the Securities and Exchange Commission (the "SEC"). Copies of
such reports, proxy and information statements, and other information can be
obtained, at prescribed rates, from the SEC by addressing written requests for
such copies to the Public Reference Section at the SEC at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. In addition, such reports, proxy
and information statements, and other information can be inspected at the public
reference facilities referred to above and at the regional offices of the SEC at
7 World Trade Center, 13th Floor, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The
SEC also maintains a web site on the World Wide Web that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC and the address is http://www.sec.gov.
This Proxy Statement constitutes part of the Registration Statement on Form
S-4 of Vaxcel (including any exhibits and amendments thereto, the "Registration
Statement") filed with the SEC under the Securities Act, relating to the
securities offered hereby. This Proxy Statement does not include all of the
information in the Registration Statement, certain portions of which have been
omitted pursuant to the rules and regulations of the SEC. For further
information about Vaxcel and the securities offered hereby, reference is made to
the Registration Statement. The Registration Statement may be inspected and
copied, at prescribed rates, at the SEC's public reference facilities at the
addresses set forth above.
All information contained in this Proxy Statement or incorporated herein by
reference with respect to Vaxcel was supplied by Vaxcel, and all information
contained in this Proxy Statement or incorporated herein by reference with
respect to Zynaxis was supplied by Zynaxis.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS PROXY STATEMENT IN ANY JURISDICTION TO OR FROM ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT NOR ANY DISTRIBUTION
OF THE SECURITIES BEING OFFERED PURSUANT TO THIS PROXY STATEMENT SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF VAXCEL OR ZYNAXIS OR THE INFORMATION SET FORTH OR INCORPORATED BY
REFERENCE HEREIN SINCE THE DATE OF THIS PROXY STATEMENT.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by Zynaxis pursuant
to the Exchange Act are hereby incorporated by reference herein:
(a) Zynaxis' Annual Report on Form 10-K/A-1 for the fiscal year ended
December 31, 1995 (provided that any information included or incorporated
by reference in response to Items 402(a)(8), (i), (k) or (1) of Regulation
S-K of the SEC shall not be deemed to be incorporated herein and is not a
part of the Registration Statement);
(b) Zynaxis' Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, June 30, and September 30, 1996;
(c) Zynaxis' Current Report on Form 8-K dated December 20, 1995; and
(d) Zynaxis' Current Report on Form 8-K dated December 6, 1996.
This Proxy Statement is accompanied by a copy of Zynaxis' Annual Report to
Shareholders for the fiscal year ended December 31, 1995 and Zynaxis' Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 1996.
Zynaxis will provide without charge, upon the written or oral request of
any person, including any beneficial owner, to whom this Proxy Statement is
delivered, a copy of any and all information (excluding certain exhibits)
relating to Zynaxis that has been incorporated by reference in the Registration
Statement of which this Proxy Statement is a part. Such requests should be
directed to Michael A. Christie, Secretary, Zynaxis, Inc., 371 Phoenixville
Pike, Malvern, Pennsylvania 19355 (telephone (610) 889-2200). In order to ensure
timely delivery of the documents, any request should be made by February ,
1997.
i
<PAGE> 12
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY............................................................................... 1
The Parties...................................................................... 1
Meeting of Shareholders.......................................................... 2
The Merger....................................................................... 3
Proposed Asset Sales............................................................. 9
Proposed Charter Amendment....................................................... 9
Comparative Market Prices of Common Stock........................................ 10
Comparative Per Share Data....................................................... 10
SELECTED HISTORICAL FINANCIAL DATA OF VAXCEL.......................................... 11
SELECTED HISTORICAL FINANCIAL DATA OF ZYNAXIS......................................... 12
RISK FACTORS.......................................................................... 13
No Assurance of Successful Development and Commercialization of Products......... 13
CytRx Control of Vaxcel.......................................................... 13
Limited Operating History and Lack of Profitability.............................. 13
Future Capital Needs; Outstanding Options; Potential Dilution.................... 14
Dependence on Collaborations and Other Commercial Arrangements................... 14
Uncertainty Regarding Sale of Cauldron Division and Other Assets................. 15
Market Acceptance; Need for Industry Group Recommendation........................ 15
Competition...................................................................... 15
Lack of Manufacturing Capabilities; Reliance on Third-Party Manufacturers........ 16
Product Liability Risks.......................................................... 16
Uncertainty of Patent Protection and Proprietary Technology...................... 16
Unfavorable Licensing Terms for PLG Technology................................... 16
Impact of Government Regulation; No Assurance of FDA Approval.................... 17
Health Care Reform Initiatives................................................... 18
No Assurance of Adequate Reimbursement........................................... 18
Lack of Marketing Experience..................................................... 19
Recruiting and Retaining of Key Personnel........................................ 19
No Prior Public Markets for Common Stock; Possible Volatility of Stock Price..... 19
Uncertainty of Listing on the Nasdaq SmallCap Market............................. 19
Absence of Dividends............................................................. 20
Anti-Takeover Protections........................................................ 20
SPECIAL MEETING OF ZYNAXIS SHAREHOLDERS............................................... 20
Date, Place, Time, and Purpose................................................... 20
Record Dates, Voting Rights, Required Votes, and Revocability of Proxies......... 21
Solicitation of Proxies.......................................................... 22
Recommendation................................................................... 22
DESCRIPTION OF TRANSACTION............................................................ 23
General.......................................................................... 23
Background of and Reasons for the Merger......................................... 24
The Merger....................................................................... 27
Exchange Ratio................................................................... 27
Per Share Price.................................................................. 28
The Transaction Documents........................................................ 28
Effect of the Merger on Stock Options, Warrants, and Promissory Notes............ 33
Effective Time of the Merger..................................................... 35
Distribution of Vaxcel Stock Certificates and Warrants........................... 35
Conditions to Consummation of the Merger......................................... 36
Regulatory Approvals............................................................. 37
Waiver, Amendment, and Termination............................................... 37
</TABLE>
ii
<PAGE> 13
<TABLE>
<CAPTION>
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<S> <C>
Dissenters' Rights............................................................... 38
Objection Rights Under Subchapter 25E of the PBCL................................ 40
Conduct of Business Pending the Merger........................................... 42
Management and Operations After the Merger....................................... 44
Interests of Certain Persons in the Merger....................................... 44
Certain Federal Income Tax Consequences.......................................... 45
Accounting Treatment............................................................. 46
Expenses and Fees................................................................ 46
Resales of Vaxcel Common Stock................................................... 47
EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS........................................ 48
Anti-takeover Provisions Generally............................................... 48
Authorized Capital Stock......................................................... 48
Amendment of Certificate of Incorporation and Bylaws............................. 49
Removal of Directors............................................................. 49
Limitations on Director Liability................................................ 49
Indemnification.................................................................. 50
Special Meetings of Shareholders................................................. 50
Actions by Shareholders Without a Meeting........................................ 51
Business Combinations with Certain Persons....................................... 51
Mergers, Consolidations, and Sales of Assets Generally........................... 52
Dissenters' Rights of Appraisal.................................................. 52
Shareholders' Rights to Examine Books and Records................................ 53
Dividends........................................................................ 53
COMPARATIVE MARKET PRICES AND DIVIDENDS............................................... 54
PRO FORMA FINANCIAL INFORMATION....................................................... 55
Pro Forma Condensed Combined Balance Sheet at September 30, 1996................. 56
Pro Forma Condensed Combined Statement of Operations for Nine Months Ended
September 30, 1996.............................................................. 57
Pro Forma Condensed Combined Statement of Operations for Year Ended
December 31, 1995.............................................................. 58
SELECTED HISTORICAL FINANCIAL DATA OF VAXCEL.......................................... 59
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS AND OPERATIONS
OF VAXCEL........................................................................... 60
General.......................................................................... 60
Financial Condition and Liquidity................................................ 60
Results of Operations............................................................ 60
Impact of Recently-Issued Accounting Standards................................... 61
BUSINESS OF VAXCEL.................................................................... 62
General.......................................................................... 62
Executive Summary................................................................ 62
Vaccines......................................................................... 62
The Vaccine Market............................................................... 62
Need for Enhanced Vaccine Adjuvants/Delivery Systems............................. 63
Vaxcel's Adjuvant/Vaccine Delivery System Technologies........................... 64
Vaxcel's Injectable Technology................................................... 64
Vaxcel's Oral Technologies....................................................... 66
Vaxcel's Business Strategy....................................................... 67
Current Corporate Collaborations................................................. 67
Product Development Activities................................................... 68
Marketing and Sales.............................................................. 69
Patents and Proprietary Technology............................................... 70
</TABLE>
iii
<PAGE> 14
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Government Regulation............................................................ 70
Competition...................................................................... 72
Manufacturing.................................................................... 73
Certain Transactions............................................................. 73
Facilities and Employees......................................................... 75
Properties....................................................................... 76
Legal Proceedings................................................................ 76
MANAGEMENT OF VAXCEL.................................................................. 77
Directors and Executive Officers................................................. 77
Director Compensation............................................................ 78
Executive Compensation and Other Information..................................... 79
Employment Agreement............................................................. 79
1993 Stock Option Plan........................................................... 80
Limitation of Liability and Indemnification...................................... 81
PRINCIPAL STOCKHOLDERS OF VAXCEL...................................................... 82
SELECTED HISTORICAL FINANCIAL DATA OF ZYNAXIS......................................... 83
BUSINESS OF ZYNAXIS................................................................... 84
SELLING SHAREHOLDERS OF ZYNAXIS....................................................... 85
PLAN OF DISTRIBUTION.................................................................. 88
PROPOSED ASSET SALES.................................................................. 89
AMENDMENT OF ZYNAXIS ARTICLES OF INCORPORATION........................................ 91
DESCRIPTION OF VAXCEL CAPITAL STOCK................................................... 92
Common Stock..................................................................... 92
Preferred Stock.................................................................. 92
Vaxcel Warrants.................................................................. 92
CytRx Warrant.................................................................... 93
Vaxcel Non-Financing Warrants.................................................... 94
LEGAL MATTERS......................................................................... 95
EXPERTS............................................................................... 96
OTHER MATTERS......................................................................... 96
APPENDICES:
Appendix A -- Agreement and Plan of Merger and Contribution
Appendix B -- Liquidation Agreement
Appendix C -- Charter Amendment
Appendix D -- Subchapter 15D of the Pennsylvania Business Corporation Law,
relating to dissenters' rights of appraisal
Appendix E -- Subchapter 25E of the Pennsylvania Business Corporation Law,
relating to objectors' rights of appraisal
Appendix F -- Note Exchange Agreement
Appendix G -- Preferred Stock and Warrant Agreement
Appendix H -- Vaxcel Warrant
Appendix I -- CytRx Warrant
</TABLE>
iv
<PAGE> 15
SUMMARY
The following is a summary of certain information contained in this Proxy
Statement and the documents incorporated herein by reference. This summary is
not intended to be a complete description of the matters covered in this Proxy
Statement and is qualified in its entirety by the more detailed information
appearing elsewhere or incorporated by reference in this Proxy Statement.
Holders of Zynaxis Capital Stock are urged to read carefully the entire Proxy
Statement, including the Appendices. In addition, holders of Zynaxis Capital
Stock should carefully consider the factors set forth under "Risk Factors." As
used in this Proxy Statement, the terms "CytRx," "Vaxcel," "Vaxcel Merger Sub"
and "Zynaxis" refer to those entities, respectively, and, where the context
requires, to those entities and their respective subsidiaries.
This Proxy Statement contains certain statements of a forward-looking
nature relating to future events or the future financial performance of Vaxcel.
Holders of Zynaxis Capital Stock are cautioned that such statements are only
predictions and that actual events or results may differ materially. In
evaluating such statements, the holders should specifically consider the various
factors identified in this Proxy Statement, including the matters set forth
under "Risk Factors," which would cause actual results to differ materially from
those indicated by such forward-looking statements.
THE PARTIES
CytRx. CytRx is the sole shareholder of Vaxcel and is engaged in the
development and commercialization of pharmaceutical related products and
services.
CytRx is a Delaware corporation, founded and incorporated in 1985. CytRx
files reports with the SEC under the Exchange Act. The common stock of CytRx is
traded on the Nasdaq National Market. The principal executive offices of CytRx
are located at 154 Technology Parkway, Norcross, Georgia 30092, and its
telephone number at such address is (770) 368-9500.
Vaxcel. Vaxcel is engaged in the development of a proprietary vaccine
delivery system ("OPTIVAX(R)") to enhance the effectiveness of a wide range of
existing vaccines and to aid in the development of new vaccines. OPTIVAX
includes a range of formulations containing certain proprietary nonionic block
copolymers which are then combined with antigens to form vaccines. Vaxcel
derives its rights to develop and commercialize OPTIVAX from a license agreement
with CytRx, which became effective in January 1993.
Since its inception, Vaxcel has devoted substantially all of its resources
to the research, development and commercialization of OPTIVAX. Vaxcel has not
received significant revenues from the sale of any of its products and has
sustained continuing operating losses. Vaxcel's accumulated deficit through
September 30, 1996 is approximately $4,200,000. Accordingly, Vaxcel has been
dependent on CytRx for capital to fund Vaxcel's operations. There can be no
assurance that Vaxcel will not require additional capital from investors to fund
its operations after the Merger. If additional capital is obtained through the
sale of securities, then the ownership position of shareholders of Vaxcel may be
diluted.
Vaxcel is a Delaware corporation, founded and incorporated in 1993 by CytRx
in order to focus on the commercial potential of OPTIVAX. Since the inception of
Vaxcel, CytRx has owned, and, until the date of the consummation of the Merger
(the "Closing"), CytRx will own all of the issued and outstanding shares of
Vaxcel Common Stock. The principal executive offices of Vaxcel are located at
154 Technology Parkway, Norcross, Georgia 30092, and its telephone number at
such address is (770) 453-0195. See "Business of Vaxcel."
Vaxcel Merger Sub. Vaxcel Merger Sub is a Georgia corporation and a newly
formed, wholly owned subsidiary of Vaxcel. Vaxcel Merger Sub has been
established for the sole purpose of merging with and into Zynaxis, in accordance
with the terms of the Agreement. As such, Vaxcel Merger Sub has no assets and
engages in no business activities. The principal executive offices of Vaxcel
Merger Sub are located at 154 Technology Parkway, Norcross, Georgia 30092, and
its telephone number at such address is (770) 453-0195.
Zynaxis. Zynaxis is engaged in the development of delivery systems
designed to enhance the performance of vaccines and drugs. In July 1995, through
a merger, Zynaxis acquired Secretech, Inc. ("Secretech"), a company engaged in
the development of oral and mucosal vaccine delivery technologies. Vaccines
using Zynaxis' proprietary delivery systems can be administered orally or
nasally rather than by
<PAGE> 16
injection and have the potential to increase protective immunity by stimulating
formation of antibodies at the most common points of entry for infectious
agents. In October 1995, Zynaxis entered into a development and licensing
agreement with ALK A/S ("ALK"), a Danish company and a leader in the area of
specific immunotherapy for allergies, which grants to ALK exclusive rights to
evaluate and develop Zynaxis' vaccine technologies for delivery of bioactive
substances to treat allergies. Prior to the acquisition of Secretech, Zynaxis
focused on the development of proprietary cell linker molecule technology
("Zyn-Linkers(R)") for the retention at disease sites of therapeutic drugs and
radiopharmaceuticals, as well as the development of cellular diagnostic products
(Zymmune(TM) CD4/CD8 Cell Monitoring Kit) to type and enumerate blood cells for
diagnosis and disease monitoring. In October 1995, Zynaxis sold the assets of
its cellular diagnostic products business to Intracel Corporation. In September
1996, Zynaxis entered into an exclusive license and purchase option agreement
with Phanos Technologies, Inc. ("Phanos") pursuant to which it granted Phanos a
license for all of its proprietary Zyn-Linker(R) technology and an option to
acquire such technology. Zynaxis also operates the Cauldron Process Chemistry
("Cauldron") division which provides collaborative consulting services on all
aspects of bulk pharmaceutical production and provides research, development and
pilot scale-up facilities to the pharmaceutical, biochemical and fine chemical
industries. Zynaxis presently is seeking a buyer for the Cauldron division.
Since its inception, Zynaxis has devoted substantially all of its resources
to the research and development of its technologies. Zynaxis has not received
significant revenues from the sale of any of its products and has sustained
continuing operating losses. Zynaxis' accumulated deficit through September 30,
1996 is approximately $47,500,000. The operations of Zynaxis will continue to
require additional capital investment by Vaxcel after the Merger.
Zynaxis is a Pennsylvania corporation, founded and incorporated in 1988.
Zynaxis files reports with the SEC under the Exchange Act. Zynaxis Common Stock
was, until December 24, 1996, traded on the Nasdaq SmallCap Market under the
symbol "ZNXS." Currently, Zynaxis Common Stock is not traded in any established
market. The mailing address of Zynaxis' principal executive office is 371
Phoenixville Pike, Malvern, Pennsylvania 19355, and its telephone number at such
address is (610) 889-2200. Additional information with respect to Zynaxis and
its subsidiaries is included in documents incorporated by reference in this
Proxy Statement. See "Available Information," "Documents Incorporated by
Reference," and "Business of Zynaxis."
MEETING OF SHAREHOLDERS
This Proxy Statement is being furnished to the holders of Zynaxis Capital
Stock in connection with the solicitation by the Zynaxis Board of proxies for
use at the Special Meeting at which Zynaxis shareholders will be asked to vote
upon (i) proposals to approve each of the Agreement and the Merger contemplated
thereby, the Asset Sales, and the Charter Amendment, and (ii) such other
business as may properly come before the meeting. The Special Meeting will be
held at 371 Phoenixville Pike, Malvern, Pennsylvania 19355, at M. local
time, on March , 1997. See "Special Meeting of Zynaxis Shareholders -- Date,
Place, Time, and Purpose."
At the Special Meeting, the Charter Amendment will be the first matter put
before the shareholders for consideration and for a vote. If the Charter
Amendment is approved by the shareholders, the Special Meeting will be adjourned
pending the filing of the Articles of Amendment, reflecting the Charter
Amendment, with the Department of State of the Commonwealth of Pennsylvania.
After the filing of the Articles of Amendment and the effectiveness of the
Charter Amendment, the Special Meeting will be reconvened to consider and vote
upon the Agreement and the Merger contemplated thereby, the Asset Sales, and
such other business as may properly come before the Special Meeting. If the
shareholders do not approve the Charter Amendment, the Special Meeting will not
be adjourned and the shareholders will be asked to consider and vote upon the
Agreement and the Merger contemplated thereby, the Asset Sales, and such other
business as may properly come before the Special Meeting.
The vote required for approval of each of the Agreement and the Merger
contemplated thereby, the Asset Sales, and the Charter Amendment, is the
affirmative vote of: (i) a majority of the votes cast, whether in person or by
proxy, by all holders of Zynaxis Preferred Stock (voting on an as converted
basis) and by all holders of Zynaxis Common Stock, entitled to vote and voting
together as a class; and (ii) a majority of the
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<PAGE> 17
votes cast, whether in person or by proxy, by all holders of Zynaxis Preferred
Stock, entitled to vote and voting as a separate class. The directors and
executive officers of Zynaxis and their affiliates are entitled to vote %
of the issued and outstanding shares of Zynaxis Capital Stock, including
% of the issued and outstanding shares of Zynaxis Preferred Stock. EACH
MEMBER OF THE ZYNAXIS BOARD INTENDS TO VOTE THOSE SHARES OF ZYNAXIS CAPITAL
STOCK OVER WHICH SUCH MEMBER HAS VOTING AUTHORITY (OTHER THAN IN A FIDUCIARY
CAPACITY) IN FAVOR OF THE AGREEMENT AND THE MERGER CONTEMPLATED THEREBY, THE
ASSET SALES AND THE CHARTER AMENDMENT, RESPECTIVELY. See "Special Meeting of
Shareholders -- Record Dates, Voting Rights, Required Votes, and Revocability of
Proxies."
The Zynaxis Board has fixed the close of business on February , 1997 as
the record date (the "Record Date") for determination of the shareholders
entitled to notice of and to vote at the Special Meeting. Only holders of record
of shares of Zynaxis Capital Stock on the Record Date will be entitled to notice
of and to vote at the Special Meeting. Holders of Zynaxis Common Stock are
entitled to one vote for each share of Zynaxis Common Stock held. When voting
together as a class with holders of Zynaxis Common Stock, holders of Zynaxis
Preferred Stock are entitled to vote on an as converted basis and are,
therefore, entitled to two votes for each share of Zynaxis Preferred Stock held.
When voting separately as a class, holders of Zynaxis Preferred Stock are
entitled to one vote for each share of Zynaxis Preferred Stock held.
Shareholders who execute proxies retain the right to revoke them at any time
prior to being voted at the Special Meeting. On the Record Date, there were
shares of Zynaxis Common Stock issued and outstanding and shares
of Zynaxis Preferred Stock issued and outstanding. See "Special Meeting of
Zynaxis Shareholders -- Record Dates, Voting Rights, Required Votes, and
Revocability of Proxies."
THE MERGER
General. Pursuant to the Agreement, at the Effective Time, Vaxcel Merger
Sub will merge with and into Zynaxis, with the effect that Zynaxis will be the
surviving corporation resulting from the Merger, and will continue to conduct
its business and operations as a wholly owned subsidiary of Vaxcel. As a result
of the Merger, the former shareholders of Zynaxis will own approximately 12.5%
of the issued and outstanding shares of Vaxcel Common Stock, and CytRx will own
approximately 87.5% of such shares assuming no exercise of any options or
warrants to purchase Vaxcel Common Stock.
At the Effective Time, (i) each share of Zynaxis Common Stock issued and
outstanding immediately prior to the Effective Time (excluding shares held by
any Zynaxis company or any Vaxcel company, and excluding shares held by
shareholders who perfect their statutory dissenters' rights under Subchapter 15D
of the PBCL or statutory objection rights under Subchapter 25E of the PBCL) will
be exchanged for the right to receive a number of shares of Vaxcel Common Stock
equal to the Exchange Ratio (as defined in the Agreement), estimated to be
approximately .0948, with cash being paid in lieu of issuing fractional shares,
and (ii) each share of Zynaxis Preferred Stock issued and outstanding
immediately prior to the Effective Time (excluding shares held by any Zynaxis
company or any Vaxcel company, and excluding shares held by shareholders who
perfect their statutory dissenters' rights under Subchapter 15D of the PBCL or
statutory objection rights under Subchapter 25E of the PBCL) will be exchanged
for the right to receive a number of shares of Vaxcel Common Stock equal to two
times the Exchange Ratio, with cash being paid in lieu of issuing fractional
shares. See "Description of Transaction -- General."
In addition, at the Effective Time, upon consummation of the Merger, CytRx
will contribute to Vaxcel the Senior Credit Facility and a cash payment (the
"Cash Payment") in an amount equal to the difference, as of the Closing, between
$4,000,000 and the sum of: (i) the aggregate principal and interest balance
outstanding under the Senior Credit Facility; and (ii) (a) the Per Share Price,
estimated to be approximately $.2757, multiplied by (b) the number of votes
entitled to be cast by the holders of Zynaxis Capital Stock, if any, who elect
to exercise their statutory dissenters' rights under Subchapter 15D of the PBCL
or their statutory objection rights under Subchapter 25E of the PBCL in excess
of three percent of the votes that could be cast by all holders of Zynaxis
Capital Stock voting together as a class. See "Description of
Transactions -- General."
Subject to the terms and conditions of the Agreement, upon consummation of
the Merger, in exchange for the contribution of the Senior Credit Facility and
the Cash Payment, Vaxcel will deliver to CytRx: (i) the CytRx Warrant to
purchase, additional shares of Vaxcel Common Stock at an exercise price equal to
one-half
3
<PAGE> 18
of the Per Share Price multiplied by the Exchange Ratio which may be exercised
if, and only if, CytRx reasonably determines that Vaxcel's total assets and
capital and surplus are insufficient to satisfy the total assets and capital and
surplus requirements for inclusion of the Vaxcel Common Stock in the Nasdaq
SmallCap Market; (ii) 1,374,996 shares of Vaxcel Common Stock; and (iii) a
number of shares of Vaxcel Common Stock equal to the product of the Exchange
Ratio, times the number of votes entitled to be cast by the holders of shares of
Zynaxis Capital Stock, if any, who elect to exercise their statutory dissenters'
rights under Subchapter 15D of the PBCL or their statutory objection rights
under Subchapter 25E of the PBCL. See "Description of Transaction -- General."
Transaction Documents. Simultaneously with the execution of the Agreement:
(i) Zynaxis and CytRx entered into the Senior Credit Facility; (ii) Zynaxis and
CytRx entered into the Liquidation Agreement, which provides for CytRx to serve
as Zynaxis' agent and assist Zynaxis in conducting the Asset Sales prior to the
Merger; (iii) Zynaxis, CytRx, Vaxcel, and the holders of all of the outstanding
shares of Zynaxis Preferred Stock, who also hold certain Zynaxis Warrants,
entered into the Preferred Stock and Warrant Agreement, conditioned upon the
consummation of the Merger, making certain agreements with respect to their
rights, and converting the Zynaxis Warrants, upon consummation of the Merger,
into Vaxcel Warrants; (iv) Zynaxis, CytRx, and Vaxcel entered into the Note
Exchange Agreement with Euclid Partners III, L.P. ("Euclid") and S.R. One, Ltd.,
who hold Zynaxis Notes, conditioned upon the consummation of the Merger,
converting the Zynaxis Notes, upon consummation of the Merger, into the right to
receive shares of Vaxcel Common Stock; (v) CytRx and certain holders of Zynaxis
Capital Stock entered into the Shareholder Voting Agreements pursuant to which
each of the Shareholders granted CytRx an irrevocable proxy to vote the shares
of Zynaxis Capital Stock held by such shareholders in favor of the Agreement and
the Merger contemplated thereby, the Asset Sales, and the Charter Amendment, and
(vi) Vaxcel and Zynaxis entered into the Technology Development Agreement
concerning the development, by Vaxcel, of certain technologies owned by or
licensed to Zynaxis. Each of the Senior Credit Facility, the Liquidation
Agreement, the Preferred Stock and Warrant Agreement, the Note Exchange
Agreement, the Shareholder Voting Agreements, and the Technology Development
Agreement are incorporated into the Agreement as exhibits thereto. See
"Description of Transaction -- The Transaction Documents."
Senior Credit Facility. In order to provide necessary funding for the
operations of Zynaxis pending the Merger, Zynaxis and CytRx entered into a
secured loan agreement (the "Secured Loan Agreement"), pursuant to which CytRx
agreed to lend up to $2,000,000 (the "Loan") to Zynaxis. Repayment of the Loan
is evidenced by a Senior Secured Note (the "Senior Secured Note") and secured by
a security interest in all of the assets of Zynaxis and its subsidiaries and
guaranteed by Zynaxis Vaccine Technologies, Inc., a wholly-owned subsidiary of
Zynaxis, pursuant to various agreements (the "Security Agreements"). The Secured
Loan Agreement, the Senior Secured Note and the Security Agreements are
collectively referred to as the "Senior Credit Facility." If the Merger is not
consummated before May 1, 1997, Zynaxis may not be able to repay the outstanding
balance due under the Senior Credit Facility. If Zynaxis defaults under the
Senior Credit Facility, CytRx may exercise its rights as a secured creditor with
respect to certain assets of Zynaxis, including, but not limited to, foreclosing
on Zynaxis' rights in its vaccine delivery technologies. See "Description of
Transaction -- Transaction Documents -- The Senior Credit Facility."
Shareholder Voting Agreements. CytRx entered into the Shareholder Voting
Agreements with certain of the shareholders of Zynaxis who, as of December 6,
1996, collectively held approximately 13.2% of the issued and outstanding shares
of Zynaxis Common Stock and approximately 25.1% of the issue and outstanding
shares of Zynaxis Preferred Stock and who, as of the Record Date, collectively
held % of the issued and outstanding shares of Zynaxis Common Stock and
% of the issued and outstanding shares of Zynaxis Preferred Stock.
Pursuant to the Shareholder Voting Agreements, each of the shareholders agreed
that: (i) at any meeting of shareholders of Zynaxis called to vote upon any of
the matters contemplated by the Agreement (including, without limitation, the
Asset Sales and the Charter Amendment) or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with respect to
any of the matters contemplated by the Agreement is sought (each a
"Shareholders' Meeting"), the shareholder will vote (or cause to be voted) the
holder's shares, to the extent then held, in favor of each of the matters
contemplated by the Agreement; and (ii) at any meeting of shareholders of
Zynaxis or at any adjournment thereof or in any other circumstances upon which
their vote, consent or other approval is sought,
4
<PAGE> 19
the holder will vote (or cause to be voted) such shareholder's shares, to the
extent then held, against (a) any merger, consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution, liquidation
or winding up of or by Zynaxis (other than the transactions contemplated by the
Agreement), or (b) any amendment of Zynaxis' Articles of Incorporation or Bylaws
or other proposal or transaction involving Zynaxis or any of its subsidiaries,
which amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify any of the transactions contemplated by the
Agreement (each of the foregoing in clause (a) or (b) above, a "Competing
Transaction"). In addition, pursuant to the Shareholder Voting Agreements, each
shareholder irrevocably granted to, and appointed, CytRx, Jack J. Luchese,
Chairman of the Board, President and Chief Executive Officer of CytRx, and Mark
W. Reynolds, Chief Financial Officer of CytRx, in their respective capacities as
officers of CytRx, and any individual who should succeed to any such office of
CytRx, and each of them individually, the shareholder's proxy and attorney-in-
fact (with full power of substitution), for and in the name, place and stead of
the shareholder, to vote the shareholder's shares, or grant a consent or
approval in respect of such shares (i) in favor of each of the matters
contemplated by the Agreement, and (ii) against any Competing Transaction. For a
more detailed discussion of the Shareholder Voting Agreements, see "Description
of the Transaction -- The Transaction Documents -- Shareholder Voting
Agreements."
Effect of the Merger on Stock Options, Warrants, and Promissory Notes. The
Agreement contemplates that at the Effective Time, each option or other equity
right to purchase shares of Zynaxis Common Stock pursuant to stock options or
stock appreciation rights ("Zynaxis Options") granted by Zynaxis under the
Zynaxis Stock Plan, as defined in the Agreement, which are outstanding at the
Effective Time, whether or not exercisable, will be converted into and become
rights with respect to Vaxcel Common Stock, and Vaxcel will assume each Zynaxis
Option, in accordance with the terms of the Zynaxis Stock Plan, and stock option
agreement by which it is evidenced, subject to certain terms as further
described herein. See "Description of the Transaction -- Effect of the Merger on
Stock Options, Warrants, and Promissory Notes."
The Agreement also contemplates that at the Effective Time, each Zynaxis
Warrant which is outstanding at the Effective Time and is held by a party to the
Preferred Stock and Warrant Agreement will be exchanged for a Vaxcel Warrant, in
accordance with the terms of the Preferred Stock and Warrant Agreement.
Specifically, pursuant to the Preferred Stock and Warrant Agreement, each of the
holders of Zynaxis Preferred Stock agreed that upon consummation of the Merger,
each Zynaxis Warrant held by the holders of Zynaxis Preferred Stock will be
exchanged for a warrant to purchase the number of shares of Vaxcel Common Stock
equal to: (i) the number of shares of Zynaxis Common Stock that the Zynaxis
Warrants held by such securityholder are exercisable to purchase at that time
multiplied by (ii) the Exchange Ratio. See "Description of the
Transaction -- Effect of the Merger on Stock Options, Warrants, and Promissory
Notes."
Additionally, each warrant to purchase Zynaxis Common Stock which is
outstanding at the Effective Time and is not being exchanged for a Vaxcel
Warrant in accordance with the Agreement and pursuant to the Preferred Stock and
Warrant Agreement (a "Zynaxis Non-Financing Warrant") will be converted into and
become a Vaxcel Non-Financing Warrant, at the Effective Time, and Vaxcel will
assume each such Zynaxis Non-Financing Warrant, in accordance with the terms of
the warrant agreement by which it is evidenced, except that from and after the
Effective Time, (i) each Zynaxis Non-Financing Warrant assumed by Vaxcel may be
exercised solely for shares of Vaxcel Common Stock, (ii) the number of shares of
Vaxcel Common Stock subject to such Zynaxis Non-Financing Warrant will be equal
to the number of shares of Zynaxis Common Stock subject to such Zynaxis
Non-Financing Warrant immediately prior to the Effective Time multiplied by the
Exchange Ratio, and (iii) the per share exercise price under each such Zynaxis
Non-Financing Warrant will be adjusted by dividing the per share exercise price
under each such Zynaxis Non-Financing Warrant by the Exchange Ratio and rounding
up to the nearest cent. See "Description of the Transaction -- Effect of the
Merger on Stock Options, Warrants, and Promissory Notes."
Each Zynaxis Note on which Zynaxis is the obligor and which is held by a
party to the Note Exchange Agreement, will be exchanged for shares of Vaxcel
Common Stock in accordance with the terms of the Note Exchange Agreement.
Zynaxis, CytRx, and Vaxcel entered into the Note Exchange Agreement with Euclid
and S.R. One, Ltd. (together with Euclid, the "Noteholders") simultaneously with
the execution of the Agreement. The Noteholders hold certain Zynaxis Notes, on
which Zynaxis is the obligor. The Note Exchange Agreement provides that upon
consummation of the Merger, each Zynaxis Note issued by Zynaxis
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<PAGE> 20
and held by a Noteholder will be exchanged for the number of shares of Vaxcel
Common Stock equal to the Exchange Ratio multiplied by the quotient (rounded
down to the nearest whole share) obtained by dividing the unpaid principal
amount of such Zynaxis Note, together with unpaid interest thereon accrued
through September 30, 1996, by the Per Share Price. See "Description of
Transaction -- The Transaction Documents -- Note Exchange Agreement" and
" -- Effect of the Merger on Stock Options, Warrants, and Promissory Notes."
Reasons for the Merger; Recommendations of the Board of Directors of
Zynaxis. The Zynaxis Board believes that the Agreement and the Merger, the
Asset Sales and the Charter Amendment are in the best interests of Zynaxis and
its shareholders. THE ZYNAXIS DIRECTORS UNANIMOUSLY RECOMMEND THAT ZYNAXIS
SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT AND THE MERGER CONTEMPLATED
THEREBY, THE ASSET SALES AND THE CHARTER AMENDMENT.
THE ZYNAXIS BOARD BELIEVES THAT, IF THE MERGER IS NOT CONSUMMATED, IT IS
HIGHLY PROBABLE THAT ZYNAXIS WILL CEASE TO EXIST AS A GOING CONCERN. The Zynaxis
Board believes that, if the Merger is not consummated, Zynaxis may not have cash
sufficient to fund its ongoing operations or to repay the funds that will have
been borrowed under the Senior Credit Facility. If Zynaxis defaults under the
Senior Credit Facility, CytRx may exercise its rights as a secured creditor with
respect to certain assets of Zynaxis, including, but not limited to, foreclosing
on Zynaxis' rights in its vaccine delivery technologies. In addition, although
Zynaxis contacted a number of interested merger partners and began negotiations
with several of them, Vaxcel was the only one willing to enter into a
transaction on terms acceptable to the Zynaxis Board. The terms of the Agreement
and the Transaction Documents provide Zynaxis with short-term financing that
allows Zynaxis to continue its operations until the Merger can be consummated,
and provides the Zynaxis shareholders with the opportunity to participate in the
equity growth that may result from the development and commercialization of the
Zynaxis vaccine delivery technologies. See "Description of
Transaction -- Background of and Reasons for the Merger."
In unanimously approving the Agreement and the Merger contemplated thereby,
the Asset Sales and the Charter Amendment, Zynaxis' directors considered, among
other things, Zynaxis' financial condition, the financial terms and the income
tax consequences of the Merger, legal advice concerning the proposed Merger, and
in general the fairness of the terms of the Merger to Zynaxis shareholders. See
"Description of Transaction -- Background of and Reasons for the Merger."
Exchange Ratio. Assuming no changes in the capitalization of either Vaxcel
or Zynaxis, the Exchange Ratio is estimated to be approximately .0948. For a
detailed description of the Exchange Ratio calculation, see "Description of
Transaction -- Exchange Ratio."
Per Share Price. Assuming no changes in the capitalization of either
Vaxcel or Zynaxis, the Per Share Price is estimated to be approximately $.2757.
For a detailed description of the Per Share Price calculation, see "Description
of Transaction -- Per Share Price."
Effective Time. Subject to the conditions to the obligations of the
parties to effect the Merger, the Effective Time of the Merger and other
transactions contemplated by the Agreement will occur upon the last to occur of:
(i) the filing of the Articles of Merger in the Department of State of the
Commonwealth of Pennsylvania; and (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of Georgia (the "Effective Time").
Unless otherwise agreed upon by Vaxcel and Zynaxis, and subject to the
conditions to the obligations of the parties to effect the Merger, the parties
will use their reasonable efforts to cause the Effective Time to occur as soon
as practical following the last to occur of: (i) the effective date (including
the expiration of any applicable waiting period) of the last consent of any
regulatory authority required for the Merger; and (ii) the date on which the
shareholders of Zynaxis approve the matters relating to this Agreement required
to be approved by such shareholders by applicable law. See "Description of
Transaction -- Effective Time of the Merger," "-- Conditions to Consummation of
the Merger," and "-- Waiver, Amendment, and Termination."
NO ASSURANCE CAN BE PROVIDED THAT THE NECESSARY SHAREHOLDER APPROVALS CAN
BE OBTAINED OR THAT THE OTHER CONDITIONS PRECEDENT TO THE MERGER CAN OR WILL BE
SATISFIED. ZYNAXIS AND VAXCEL ANTICIPATE THAT ALL CONDITIONS TO THE CONSUMMATION
OF THE MERGER WILL BE SATISFIED SO THAT THE MERGER CAN BE CONSUMMATED DURING THE
FIRST QUARTER OF 1997. HOWEVER, DELAYS IN THE CONSUMMATION OF THE MERGER COULD
OCCUR.
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<PAGE> 21
Exchange of Stock Certificates, Warrants and Promissory Notes. Promptly
after the Effective Time, Vaxcel will cause American Stock Transfer and Trust
Company, acting in its capacity as exchange agent for Vaxcel (the "Exchange
Agent"), to mail to each holder of record of a certificate or certificates
(collectively, the "Certificates") which, immediately prior to the Effective
Time, represented outstanding shares of Zynaxis Capital Stock, a letter of
transmittal and instructions for use in effecting the surrender and cancellation
of the Certificates in exchange for certificates representing shares of Vaxcel
Common Stock. Cash will be paid to the holders of Zynaxis Capital Stock in lieu
of the issuance of any fractional shares of Vaxcel Common Stock. In no event
will the holder of any surrendered Certificate(s) be entitled to receive
interest on any cash to be issued to such holder, and in no event will Zynaxis,
Vaxcel, or the Exchange Agent be liable to any holder of Zynaxis Capital Stock
for any Vaxcel Common Stock or dividends thereon or cash delivered in good faith
to a public official pursuant to any applicable abandoned property, escheat, or
similar law. See "Description of Transaction -- General" and "-- Distribution of
Vaxcel Stock Certificates and Warrants."
Pursuant to the Preferred Stock and Warrant Agreement, at the Closing, each
holder of a Zynaxis Warrant who is a party to the Preferred Stock and Warrant
Agreement will surrender the Zynaxis Warrant and Vaxcel will deliver to each
such holder in exchange a Vaxcel Warrant. At the Closing, each holder of a
Zynaxis Non-Financing Warrant will surrender such warrant and Vaxcel will
deliver to each such holder in exchange a Vaxcel Non-Financing Warrant. At the
Closing, each holder of a Zynaxis Note will deliver to Zynaxis the Zynaxis Note,
marked "Paid in Full," and Vaxcel will deliver to each such holder in exchange a
certificate representing all the Note Shares to be issued in exchange for such
Zynaxis Note. See "Description of Transaction -- Distribution of Vaxcel Stock
Certificates and Warrants."
Conditions to Consummation. Consummation of the Merger is subject to
various conditions, including receipt of the required approvals of Zynaxis
shareholders, receipt of an opinion of counsel as to the tax-free nature of
certain aspects of the Merger and certain other conditions. See "Description of
Transaction -- Conditions to Consummation of the Merger."
Waiver, Amendment, and Termination. The Agreement may be terminated and
the Merger abandoned at any time prior to the Effective Time (i) by the mutual
consent of the Boards of Directors of Zynaxis and CytRx; and (ii) by the Boards
of Directors of either Zynaxis or CytRx (a) in the event of any material breach
of any representation or warranty of the other party contained in the Agreement
which cannot be or has not been cured within 30 days after giving written notice
to the breaching party of such inaccuracy and which breach is reasonably likely,
in the opinion of the non-breaching party, to have, individually or in the
aggregate, a Material Adverse Effect, as defined in the Agreement, on the
breaching party (provided that the terminating party is not then in material
breach of any representation warranty, covenant, or other agreement contained in
the Agreement), (b) in the event of a material breach by the other party of any
covenant or agreement contained in the Agreement which cannot be or has not been
cured within 30 days after the giving of written notice to the breaching party
of such breach (provided that the terminating party is not then in material
breach of any representation, warranty, covenant, or other agreement contained
in the Agreement), (c) in the event (1) any consent of any regulatory authority
required for consummation of the Merger and the other transactions contemplated
hereby shall have been denied by final nonappealable action of such authority or
if any action taken by such authority is not appealed within the time limit for
appeal, or (2) the shareholders of Zynaxis fail to vote their approval of the
matters relating to the Agreement and the transactions contemplated thereby at
the Special Meeting where such matters were presented to such shareholders for
approval and voted upon (provided that the terminating party is not then in
material breach of any representation, warranty, covenant, or other agreement
contained in the Agreement), (d) if the Merger is not consummated by March 31,
1997, provided that the failure to consummate is not due to the breach by the
party electing to terminate, or (e) if any of the conditions precedent to the
obligations of such party to consummate the Merger have not been satisfied,
fulfilled, or waived by the appropriate party by March 31, 1997 (provided that
the terminating party is not then in material breach of any representation,
warranty or covenant or other agreement contained in the Agreement). To the
extent permitted by law, the Agreement may be amended upon the written agreement
of the parties to the Agreement without the approval of shareholders; provided,
however, that after the Special Meeting, no amendment may reduce or modify in
any material respect the consideration to be received by holders of Zynaxis
Capital Stock without the requisite approval of the holders of the issued and
outstanding shares of Zynaxis Capital Stock entitled to vote thereon. In
addition, prior to or
7
<PAGE> 22
at the Effective Time, either Zynaxis or Vaxcel, or both, acting through their
respective Boards of Directors or chief executive officers or other authorized
officers may waive any default in the performance of any term of the Agreement
by the other party, may waive or extend the time for the compliance or
fulfillment by the other party of any and all of its obligations under the
Agreement, and may waive any of the conditions precedent to the obligations of
such party under the Agreement, except any condition that, if not satisfied,
would result in the violation of any applicable law or governmental regulation.
No such waiver will be effective unless written and unless executed by a duly
authorized officer of Zynaxis or Vaxcel, as the case may be. See "Description of
Transaction -- Waiver, Amendment, and Termination."
Dissenters' Rights. Pursuant to Subchapter 15D of the PBCL, the holders of
Zynaxis Capital Stock have dissenters' rights with respect to the Merger and the
Asset Sales. Any Zynaxis shareholder who does not vote in favor of the proposal
to approve the Agreement and the Merger contemplated thereby, or the Asset Sales
and who complies with certain requirements of the applicable provisions of the
PBCL may have the right to an appraisal and payment for such person's shares of
Zynaxis Capital Stock.
TO PERFECT DISSENTERS' RIGHTS OF APPRAISAL, A HOLDER OF ZYNAXIS CAPITAL
STOCK MUST STRICTLY COMPLY WITH THE APPLICABLE STATUTORY PROVISIONS THEREOF, A
COPY OF WHICH IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX D. ANY HOLDER OF
ZYNAXIS CAPITAL STOCK WHO RETURNS A SIGNED PROXY BUT WHO FAILS TO PROVIDE VOTING
INSTRUCTIONS WITH RESPECT TO THE PROPOSALS TO APPROVE THE AGREEMENT AND THE
MERGER CONTEMPLATED THEREBY, AND THE ASSET SALES WILL BE DEEMED TO HAVE VOTED IN
FAVOR OF SUCH PROPOSAL AND WILL NOT BE ENTITLED TO ASSERT DISSENTERS' RIGHTS OF
APPRAISAL. See "Description of Transaction -- Dissenters' Rights."
Objection Rights Under Subchapter 25E of the PBCL. If the Charter
Amendment is not approved by the holders of Zynaxis Capital Stock and Vaxcel
elects to proceed with the Merger, each of the holders of Zynaxis Capital Stock,
pursuant to Subchapter 25E of the PBCL, who objects to the Merger and complies
with certain procedural requirements will be entitled to receive cash for each
of such shareholder's shares of Zynaxis Capital Stock in an amount equal to the
"fair value" of each share of Zynaxis Capital Stock as of the date of
consummation of the Merger.
TO BE ENTITLED TO THE RIGHTS AND REMEDIES UNDER SUBCHAPTER 25E, A HOLDER OF
ZYNAXIS CAPITAL STOCK MUST STRICTLY COMPLY WITH THE APPLICABLE STATUTORY
PROVISIONS THEREOF, A COPY OF WHICH IS ATTACHED TO THIS PROXY STATEMENT AS
APPENDIX E. See "Description of Transaction -- Objection Rights Under Subchapter
25E of the PBCL."
Interests of Certain Persons in the Merger. Certain members of Zynaxis'
management and the Zynaxis Board have interests in the Merger in addition to
their interests as shareholders of Zynaxis generally. See "Description of
Transaction -- Interests of Certain Persons in the Merger."
Certain Federal Income Tax Consequences of the Merger. It is the intention
of the parties to the Agreement that the transactions contemplated by the
Agreement shall qualify for federal income tax purposes for treatment under
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code").
Consummation of the Merger is conditioned upon receipt by each party of a
written opinion from Alston & Bird to the effect that for federal income tax
purposes the contributions solely in exchange for Vaxcel Common Stock will
constitute a tax-free exchange under Section 351 of the Code. TAX CONSEQUENCES
OF THE MERGER FOR INDIVIDUAL TAXPAYERS CAN VARY, HOWEVER, AND ALL ZYNAXIS
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE EFFECT
OF THE MERGER ON THEM UNDER FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS. NO
OPINION IS EXPRESSED AS TO THE TAXATION OF THE EXCHANGE BY HOLDERS OF WARRANTS
FOR ZYNAXIS COMMON STOCK FOR WARRANTS FOR VAXCEL COMMON STOCK. For a further
discussion of the federal income tax consequences of the Merger, See
"Description of Transaction -- Certain Federal Income Tax Consequences."
Accounting Treatment. It is intended that the Merger will be accounted for
as a purchase by Vaxcel of Zynaxis for accounting and financial reporting
purposes. See "Description of Transaction -- Accounting Treatment."
Certain Differences in Shareholders' Rights. At the Effective Time,
Zynaxis shareholders, whose rights are governed by Zynaxis' Articles of
Incorporation and Bylaws and by the PBCL, will automatically become Vaxcel
shareholders, and their rights as Vaxcel shareholders will be determined by
Vaxcel's Amended and
8
<PAGE> 23
Restated Certificate of Incorporation ("Certificate of Incorporation") and
Bylaws and by the Delaware General Corporation Law ("DGCL"). See "Effect of the
Merger on Rights of Shareholders."
The rights of Vaxcel shareholders differ from the rights of Zynaxis
shareholders in certain important respects, some of which constitute additional
anti-takeover provisions provided for in Vaxcel's governing documents. See
"Effect of the Merger on Rights of Shareholders."
Conduct of Business Pending the Merger. Each party has agreed in the
Agreement to, among other things, operate its business only in the ordinary
course, except for the Asset Sales, and to take no action that would adversely
affect its ability to perform its covenants and agreements under the Agreement.
In addition, Zynaxis has agreed not to take certain actions relating to the
operation of Zynaxis pending consummation of the Merger without the prior
written consent of Vaxcel, except as otherwise permitted by the Agreement,
including, among other things: (i) incurring any additional debt obligation or
other obligation for borrowed money, except in the ordinary course of business
consistent with past practices; (ii) paying any dividends, exchanging any shares
of its capital stock, or, subject to certain exceptions, issuing any additional
shares of its capital stock or giving any person the right to acquire any such
shares; (iii) acquiring control over any other entity; (iv) subject to certain
exceptions, granting any increase in compensation or benefits, or paying any
bonus, to any of its officers or employees; or (v) subject to certain
exceptions, modifying or adopting any employee benefit plans, including any
employment contract. See "Description of Transaction -- Conduct of Business
Pending the Merger."
Risk Factors. Holders of Zynaxis Capital Stock should take into account
the specific considerations set forth under "Risk Factors" as well as the other
information set forth in this Proxy Statement. In particular, shareholders of
Zynaxis should take into account the following risk factors: (i) no assurance of
successful development and commercialization of products; (ii) control of Vaxcel
by CytRx; (iii) limited operating history of Vaxcel and lack of profitability;
(iv) need for more capital in the future and accompanying dilution; (v)
dependence on collaborations and other commercial arrangements; (vi) uncertainty
regarding the sale of certain assets; (vii) market acceptance of major products;
(viii) competition; (ix) lack of manufacturing capabilities; (x) product
liability risks; (xi) uncertainty of patent protection and proprietary
technology; (xii) unfavorable licensing terms for certain technologies; (xiii)
impact of government regulation and no assurance of Food and Drug Administration
approvals; (xiv) health care reform initiatives and no assurance of adequate
reimbursement; (xv) lack of marketing experience; (xvi) need to recruit
personnel; (xvii) lack of a prior market for Vaxcel Common Stock and the
volatility of market prices for securities of similar companies; (xviii)
uncertainty of being able to list shares on the Nasdaq SmallCap Market and (xix)
certain anti-takeover protections.
FOR A MORE DETAILED DISCUSSION OF THESE AND OTHER RISK FACTORS IN
CONNECTION WITH THE MERGER, SEE "RISK FACTORS."
PROPOSED ASSET SALES
At the Special Meeting, the shareholders of Zynaxis will also be asked to
consider and vote upon the approval of Asset Sales on terms and conditions to be
determined by the Zynaxis Board of Directors. Pursuant to the Liquidation
Agreement and subject to shareholder approval, CytRx will serve as Zynaxis'
agent and assist Zynaxis in conducting the Asset Sales prior to the Merger. All
sales of material assets will be contingent on shareholder approval of the Asset
Sales. The approval of the Asset Sales by the shareholders of Zynaxis is a
condition to consummation of the Merger. See "Description of Transaction -- The
Transaction Documents" and "Proposed Asset Sales."
PROPOSED CHARTER AMENDMENT
At the Special Meeting, the shareholders of Zynaxis will be asked to
consider and vote upon the approval of the Charter Amendment to the Articles of
Incorporation of Zynaxis to make Subchapter 25E of the PBCL inapplicable to
Zynaxis. Subchapter 25E (relating to control transactions) provides that if any
person or group acquires 20% or more of the voting power of a covered
corporation, the remaining shareholders may demand from such person or group the
fair value of their shares, including a proportionate amount of any control
premium. Pursuant to Section 2541(a)(4) of the PBCL, the articles of
incorporation of a Pennsylvania corporation can explicitly provide that
Subchapter 25E is not applicable by an amendment adopted by the shareholders of
such corporation prior to a control transaction. The adoption of the Charter
Amendment
9
<PAGE> 24
amending the Articles of Incorporation and making Subchapter 25E inapplicable to
the Merger is a condition to consummation of the Merger. See "Description of the
Transaction -- Objection Rights Under Subchapter 25E of the PBCL."
COMPARATIVE MARKET PRICES OF COMMON STOCK
There is no public trading market for Vaxcel Common Stock. Zynaxis Common
Stock was, until December 24, 1996, traded in the over-the-counter market and
quoted on the Nasdaq SmallCap Market under the symbol "ZNXS." Currently, Zynaxis
Common Stock is not traded in any established market. The following table sets
forth, as of the indicated dates, the last sale price of Zynaxis Common Stock as
reported by the Nasdaq SmallCap Market or as known by management of Zynaxis.
Because there is no public trading market for Vaxcel Common Stock, no equivalent
per share price of Zynaxis Common Stock based on the Exchange Ratio can be
calculated. The indicated dates of December 5, 1996 and February , 1997
represent, respectively, the last trading day immediately preceding public
announcement of the proposed acquisition of Zynaxis by Vaxcel and the latest
practicable date prior to the mailing of this Proxy Statement. For more
information, see "Comparative Market Prices and Dividends."
<TABLE>
<CAPTION>
MARKET PRICE ZYNAXIS
PER SHARE AT: COMMON STOCK
- ----------------- ------------
<S> <C>
December 5, 1996 $ 0.1875
February , 1997 $
</TABLE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain unaudited selected financial
information on a pro forma and pro forma equivalent basis per common share. The
information presented in this table should be read in conjunction with the
separate historical financial statements and the interim unaudited condensed
financial statements of Vaxcel and Zynaxis and the notes thereto and in
conjunction with the unaudited pro forma condensed combined financial
information included elsewhere herein.
The pro forma combined net loss per share assumes that the Merger was
effective as of the first day of each period reported. The pro forma combined
book value per share assumes that the Merger was effective as of the date
reported. The number of common shares outstanding used to calculate pro forma
combined net loss per share and pro forma combined book value per share is based
on the presumption that there would be 11,000,000 shares of Vaxcel Common Stock
outstanding upon each of the pro forma effective dates of the Merger. The pro
forma equivalent data for Zynaxis was computed by multiplying the pro forma
combined net loss per share or the pro forma combined book value per share by
the Exchange Ratio. No cash dividends have been declared or paid by Vaxcel or
Zynaxis during the periods reported. For more information, see "Pro Forma
Financial Information."
<TABLE>
<CAPTION>
HISTORICAL ZYNAXIS
----------------- PRO FORMA PRO FORMA
VAXCEL ZYNAXIS EQUIVALENT COMBINED
------ ------- --------- ---------
<S> <C> <C> <C> <C>
Net loss per share:
Nine months ended September 30, 1996....... $(0.10) $ (0.20) $(.02) $ (0.24)
Year ended December 31, 1995............... (0.17) (1.57) (.10) (1.03)
Book value per share:
September 30, 1996......................... 0.01 0.10 .06 0.68
December 31, 1995.......................... 0.07 0.25 .07 0.72
</TABLE>
10
<PAGE> 25
SELECTED HISTORICAL FINANCIAL DATA OF VAXCEL
The selected financial data as of December 31, 1995, and for each of the
two years in the period ended December 31, 1995, and for the period from
inception (at January 6, 1993) through December 31, 1993, is derived from the
financial statements of Vaxcel, which are included herein. Such financial
statements have been audited by Ernst & Young LLP, independent auditors of
Vaxcel. The selected statement of operations data for the nine months ended
September 30, 1995 and 1996 and the selected balance sheet data as of September
30, 1996, have been derived from unaudited financial statements of Vaxcel, that,
in the opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for fair presentation of such data at such
dates and for such periods in accordance with generally accepted accounting
principles. The selected financial data for the nine months ended September 30,
1996 are not necessarily indicative of the results to be expected for the full
year. The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Vaxcel" and the financial statements of Vaxcel and notes thereto
included in this Proxy Statement.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JANUARY 6,
FOR THE FOR THE 1993)
NINE MONTHS ENDED YEARS ENDED THROUGH
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------------------------ ------------------------------ ------------
1996 1995 1995 1994 1993
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues............................ $ 80,635 $ 25,000 $ 121,709 $ 500,814 $ 506,317
Operating Expenses:
Cost of sales....................... -- -- -- 72,636 74,066
Research and development............ 540,744 559,965 894,754 570,548 791,996
Marketing, general and
administrative.................... 316,663 364,794 534,542 845,901 1,027,803
Write-off of patent costs........... -- 128,216 128,216 -- --
------------- ------------- ------------- ------------- ------------
857,407 1,052,975 1,557,512 1,489,085 1,893,865
Other Income (Expense):
Interest income (expense), net...... 6,459 47,930 56,998 (111,572) (55,635)
Sale of animal adjuvant rights...... -- -- -- 500,000 --
------------- ------------- ------------- ------------- ------------
6,459 47,930 56,998 388,428 (55,635)
Net loss................................ $(770,313) $ (980,045) $ (1,378,805) $ (599,843) $ (1,443,183)
------------- ------------- ------------- ------------- ------------
Net loss per common share............... $ (.10) $ (.12) $ (.17) $ (.09) $ (.24)
============ ========== ============ ============ ============
Shares used in computing net loss per
common share.......................... 8,058,029 8,000,000 8,000,000 6,826,027 6,000,000
<CAPTION>
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
------------- ----------------------------------------------
1996 1995 1994 1993
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........... $ 18,832 $ 515,522 $ 527,948 $ 40,423
Working capital..................... (29,894) 402,861 521,913 (45,117)
Total assets........................ 168,945 701,868 1,043,575 825,900
Stockholder's equity................ 113,856 584,169 962,974 (1,437,183)
</TABLE>
11
<PAGE> 26
SELECTED HISTORICAL FINANCIAL DATA OF ZYNAXIS
The selected consolidated financial data as of December 31, 1994 and
December 31, 1995, and for each of the three years in the period ended December
31, 1995, is derived from the consolidated financial statements of Zynaxis,
which are incorporated by reference in Zynaxis' Form 10-K/A-1 for the year ended
December 31, 1995. Such financial statements have been audited by Arthur
Andersen LLP, independent public accountants, whose report on the financial
statements includes an explanatory paragraph concerning Zynaxis' ability to
continue as a going concern. The selected consolidated financial data as of
December 31, 1991, December 31, 1992 and December 31, 1993, and for the years
ended December 31, 1991 and 1992, is derived from the audited financial
statements of Zynaxis, not included or incorporated by reference herein. The
selected consolidated statement of operations data for the nine months ended
September 30, 1995 and 1996 and the selected consolidated balance sheet data as
of September 30, 1996, have been derived from unaudited consolidated financial
statements of Zynaxis, which are incorporated by reference in Zynaxis' Form 10-Q
for the quarterly period ended September 30, 1996, that, in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for fair presentation of such data at such dates and for
such periods in accordance with generally accepted accounting principles. The
selected consolidated financial data for the nine months ended September 30,
1996 are not necessarily indicative of the results to be expected for the full
year. The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of Zynaxis
and notes thereto incorporated by reference in this Proxy Statement. For more
information, see "Selected Historical Financial Data of Zynaxis."
<TABLE>
<CAPTION>
FOR THE FOR THE
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------------- -----------------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Revenues......... $ 1,689,205 $ 305,816 $ 761,792 $ 1,163,955 $ 1,573,550 $ 1,166,658 $ 199,172
Operating Expenses:
Cost of sales.... -- 40,261 40,262 273,088 -- -- --
Research and
development.... 2,781,827 4,192,422 5,168,912 6,344,221 7,042,790 4,341,691 3,030,627
Marketing,
general and
administrative... 1,333,356 1,547,162 2,239,921 3,397,948 2,875,112 1,263,317 583,326
Charge for
acquired
research and
development.... -- 3,647,321 5,165,793 -- -- -- --
Restructuring
charge......... -- 347,436 347,436 -- -- -- --
Provision for
asset
impairment..... -- -- -- 1,466,360 -- -- --
------------- ------------- ------------- ------------- ------------- ------------- -------------
4,115,183 9,774,602 12,962,324 11,481,617 9,917,902 5,605,008 3,613,953
Other Income
(Expense):
Interest income
(expense),
net............ 10,956 38,104 44,023 106,259 574,261 1,023,676 (65,575)
Other income
(expense)...... 420,346 91,134 162,232 -- -- -- --
Net gain on sale
of diagnostics
technologies
and assets..... -- 1,595,616 1,616,840 -- -- -- --
------------- ------------- ------------- ------------- ------------- ------------- -------------
431,302 1,724,854 1,823,095 106,259 574,261 1,023,676 (65,575)
Net loss........... $(1,994,676) $ (7,743,932) $ (10,377,437) $ (10,211,403) $ (7,770,091) $ (3,414,674) $ (3,480,356)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net loss per common
share............ $ (0.20) $ (1.29) $ (1.57) $ (1.95) $ (1.49) $ (0.71) $ (1.69)
=========== ========== =========== =========== ========== ========== ===========
Shares used in
computing net
loss per common
share(1)......... 10,060,509 5,988,748 6,602,813 5,241,317 5,204,967 4,837,661 2,061,560
<CAPTION>
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
------------- -----------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash
equivalents and
investments.... $ 223,177 $ 509,143 $ 2,216,456 $ 15,375,621 $ 22,901,516 $ 401,455
Working capital
(deficit)...... (1,307,660) (733,698) 1,122,483 12,917,242 13,005,985 (1,515,674)
Total assets..... 2,933,269 3,987,828 6,399,135 20,888,148 24,429,508 1,672,064
Long-term debt
and other
long-term
obligations.... 157,087 183,403 212,245 3,833,841 312,058 11,989,041
Shareholders'
equity
(deficit)(2)... 1,023,517 2,357,595 5,277,193 15,463,531 23,063,154 (12,357,179)
</TABLE>
- ---------------
(1) Computed on basis described for net loss per share in Note 2 to the
consolidated financial statements of Zynaxis.
(2) Includes accretion of $2,543,068 to Zynaxis Preferred Stock redemption
value. No dividends on the Zynaxis Common Stock have been declared or paid
since the inception of Zynaxis.
12
<PAGE> 27
RISK FACTORS
Holders of Zynaxis Capital Stock and Zynaxis Notes should be aware that
ownership of the shares of Vaxcel Common Stock to be exchanged for shares of
Zynaxis Capital Stock and Zynaxis Notes involves a high degree of risk. In
addition to other information in this Proxy Statement, the following risk
factors should be considered carefully by such shareholders and note holders in
evaluating the Merger. Except for historical information contained herein, the
discussion in this Proxy Statement contains forward-looking statements that
involve risks and uncertainties, such as statements of Vaxcel's plans,
objectives, expectations and intentions. The cautionary statements made in this
Proxy Statement should be read as being applicable to all related
forward-looking statements wherever they appear in this Proxy Statement.
Vaxcel's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include those
discussed below, as well as those discussed elsewhere herein.
NO ASSURANCE OF SUCCESSFUL DEVELOPMENT AND COMMERCIALIZATION OF PRODUCTS
Vaxcel's OPTIVAX adjuvant and the Zynaxis vaccine technologies to be
acquired by Vaxcel pursuant to the Merger are in the early stages of development
and significant amounts of money and time will be required to commercialize
vaccines in partnering or other collaborative arrangements based on the
technologies. Research and development activities, by their nature, preclude
definitive statements as to the time required and costs involved in reaching
certain objectives. Therefore, actual research and development costs could
exceed budgeted amounts, and estimated time frames may require extension. Cost
overruns due to unanticipated regulatory delays or demands, unexpected adverse
side effects or insufficient therapeutic efficacy would prevent or substantially
slow development efforts and ultimately could have a material adverse effect on
Vaxcel and its partners. If Vaxcel or its partners encounter technical problems
in the further development of the technologies, Vaxcel could be required either
to abandon or substantially modify its development program. There can be no
assurance that OPTIVAX or any of the Zynaxis technologies will prove to be safe
and effective with any vaccine. There can be no assurance that OPTIVAX or any of
the Zynaxis technologies will be approved by the United States Food and Drug
Administration (the "FDA") or equivalent foreign authorities for use with any
vaccine that is currently on the market or under development or that, if
approved, the product will be accepted in the market or that such product can be
commercialized in a profitable manner. Furthermore, OPTIVAX and/or the Zynaxis
technologies could produce adverse side effects after commercialization that
would cause the vaccine to be withdrawn from the market. Vaxcel does not expect
that vaccines utilizing OPTIVAX or the Zynaxis technologies will be
commercialized for several years, if at all. The failure of Vaxcel to
successfully commercialize OPTIVAX and/or the Zynaxis technologies or delays in
the development and commercialization process could materially adversely affect
the business, financial condition and results of operations of Vaxcel.
CYTRX CONTROL OF VAXCEL
CytRx currently holds all of the issued and outstanding shares of capital
stock of Vaxcel. Following the consummation of the Merger, CytRx will own
approximately 87.5% of the issued and outstanding shares of Vaxcel Common Stock,
assuming that no holder of Zynaxis Capital Stock exercises its appraisal or
objection rights and before giving effect to the exercise of any Vaxcel Warrants
or the CytRx Warrant. Accordingly, CytRx will have the ability to control the
management and policies of Vaxcel and the outcome of matters submitted to the
shareholders for approval, including the election of directors.
LIMITED OPERATING HISTORY AND LACK OF PROFITABILITY
Zynaxis and Vaxcel commenced operations in 1988 and 1993, respectively, and
both companies have been unprofitable since their inception. The report of
Zynaxis' independent public accountants on the audited financial statements of
Zynaxis for the year ended December 31, 1995 includes an explanatory paragraph
regarding Zynaxis' inability to continue as a going concern. After the
consummation of the Merger, Vaxcel will experience further losses, which could
be significant, during the next several years and there can be no assurance that
further significant losses will not be realized by Vaxcel over a longer period
of time. In addition, Vaxcel's cash needs could be affected by higher than
anticipated costs of preclinical and clinical trials, delays
13
<PAGE> 28
in the FDA regulatory process, the inability of Vaxcel to enter into
collaborative arrangements with third parties, the inability of Vaxcel to find
third-party manufacturing facilities, the inability of Vaxcel to sell Cauldron
at the anticipated price and other factors.
To achieve profitable operations after the consummation of the Merger,
Vaxcel, through collaborations with vaccine companies, must successfully
develop, manufacture, introduce and market products containing its technologies.
The development of vaccines utilizing Vaxcel's technologies will require
substantial resources to conduct research, preclinical trials and clinical
trials; to establish pilot scale and commercial scale manufacturing processes
and facilities; and to establish quality control, regulatory and administrative
capabilities. The time required to reach sustained profitability is highly
uncertain, and there can be no assurance that Vaxcel will be able to achieve
profitability on a sustained basis, if at all. If profitability is achieved, the
level of the profitability cannot be predicted.
FUTURE CAPITAL NEEDS; OUTSTANDING OPTIONS; POTENTIAL DILUTION
Since their inception, neither Vaxcel or Zynaxis has recorded an operating
profit. Vaxcel has been dependent upon CytRx for its continuing capital needs.
However, CytRx is not obligated to provide any capital to Vaxcel or its
subsidiaries. After consummation of the Merger, Vaxcel may need to raise
substantial additional funds to conduct the research and development activities
necessary to receive FDA approval for vaccines containing OPTIVAX and the
Zynaxis technologies. Adequate funds for these purposes may not be available
when needed or on terms satisfactory to Vaxcel. Lack of funding when needed may
cause Vaxcel to delay, reduce and/or abandon certain or all aspects of its
research and development programs. Vaxcel may seek additional funding for its
research and development activities through a variety of financing mechanisms,
including the issuance of equity securities. Any such financing may dilute the
existing shareholders of Vaxcel.
Vaxcel has granted options to employees and directors to purchase 794,953
shares of Vaxcel Common Stock at an exercise price of $1.50 per share. Holders
of such options are likely to exercise them when, in all likelihood, Vaxcel
could obtain additional capital on terms more favorable then those provided by
the options. In addition, the exercise of such options will result in dilution
to the interests of the shareholders of Vaxcel to the extent that the exercise
price is less than the fair market value of the Vaxcel Common Stock.
DEPENDENCE ON COLLABORATIONS AND OTHER COMMERCIAL ARRANGEMENTS
At the present time, Vaxcel does not own or have the right to any vaccines
or antigens that can be used with OPTIVAX or the Zynaxis technologies, nor does
it expect to conduct research and development on antigens internally in the near
future. Vaxcel's success is dependent upon its ability to license its
technologies to vaccine manufacturers for use with their vaccines.
Pharmaceutical companies seeking collaborative agreements in order to avail
themselves of products in the development stage have become increasingly more
selective and have required substantial proof of principal, safety and efficacy
before agreeing to provide any collaborative funding. After consummation of the
Merger, Vaxcel will have two license agreements, two option agreements, and
several research agreements. There can be no assurance that any of the option or
research agreements between Vaxcel and vaccine manufacturers and institutions
will be expanded into licensing or other collaboration agreements or that any
new license, option, or research agreements will be entered into in the future.
Even if a vaccine company or other third party is interested in entering into an
arrangement to use OPTIVAX or the Zynaxis technologies with its vaccine, there
can be no assurance that any such arrangement will be on terms satisfactory to
Vaxcel or that any funds received by Vaxcel from the collaboration will be
sufficient to cover Vaxcel's expenses related to the product. Moreover, if
Vaxcel does enter into a licensing or other collaboration arrangement with
respect to a vaccine, it may be required to rely on the third party for
important research, development, regulatory, manufacturing and marketing
activities involving Vaxcel's technologies. There can be no assurance that
Vaxcel's licensees or collaborative partners will perform such activities in a
timely or adequate manner, or that any products resulting from any such
arrangement will be successfully commercialized.
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UNCERTAINTY REGARDING SALE OF CAULDRON DIVISION AND OTHER ASSETS
In the Merger, Vaxcel will acquire the Cauldron division which provides
collaborative consulting services on all aspects of bulk pharmaceutical
production and provides research, development, and pilot scale-up facilities to
the pharmaceutical, biochemical and fine chemical industries. Prior to the
merger, Zynaxis has been seeking a buyer for the Cauldron division. After
consummation of the Merger, Vaxcel plans to divest the Cauldron division in
order to generate cash to fund its operations, including development of its
vaccine adjuvants/delivery technologies. There can be no assurance that Vaxcel
will be able to conclude a sale, on a timely basis, or that such a sale will
generate a fair market value for the division. If Vaxcel fails to find a buyer
for the Cauldron division, Vaxcel will experience higher operating costs than
anticipated which could have an adverse affect on Vaxcel's financial resources.
While the costs may be partially offset by the revenues generated by the
Cauldron division, such revenues are uncertain in the future. Also, if Vaxcel is
forced to close the Cauldron division, Vaxcel could be faced with the costs of
such a shutdown, including the costs of employee severance.
Vaxcel also plans to sell certain other assets of Zynaxis that are of no
value to the new entity. However, there are no assurances that Vaxcel will be
able to successfully dispose of such assets.
MARKET ACCEPTANCE; NEED FOR INDUSTRY GROUP RECOMMENDATION
Even if products being developed by Vaxcel and its collaborators are
approved for commercial use, there can be no assurance that a vaccine
administered with OPTIVAX or the Zynaxis technologies will be widely used.
Although Vaxcel will attempt to license the technologies for use with vaccines
that present attractive market opportunities, the widespread usage of vaccines
is often determined by the immunization policies of a country. In the United
States, three medical groups develop the immunization policies of an
FDA-approved vaccine for the general population: (i) the Committee on Infectious
Diseases of the American Academy of Pediatrics establishes policies for private
practicing pediatricians; (ii) the Immunization Practices Advisory Committee
develops similar policies for city, county and state public health clinics; and
(iii) the Committee on Immunization of the Council of Medical Societies of the
American College of Physicians determines policies for generalists and
internists. The support of these groups is critical to the commercial success of
a vaccine. A recommendation for routine use of a new vaccine in the general
population is typically required for widespread acceptance by the medical
community, especially for pediatric vaccines. There can be no assurance that any
vaccine used with OPTIVAX or the Zynaxis technologies will be recommended for
use by any of these committees.
COMPETITION
Research and development of vaccine adjuvants/delivery systems is a
relatively new field. Management of Vaxcel is aware of certain companies that
have experience in this field, some of which have licensed compounds to major
vaccine manufacturers. Some of the products being developed by these companies
have been tested in human clinical trials. In addition, a variety of smaller
companies and academic and research institutions are attempting to develop
vaccine adjuvants/delivery systems. To date, there have been limited preclinical
and human studies comparing the various delivery systems. There can be no
assurance that OPTIVAX or the Zynaxis technologies will perform better than or
equal to competitive vaccine adjuvants/ delivery systems. These competitors or
others may develop products or technologies that could render OPTIVAX and the
Zynaxis technologies either obsolete or less competitive. In addition, advances
in disease prevention or treatment methods also could adversely affect the
market for OPTIVAX and the Zynaxis technologies. The research, development,
manufacturing and marketing of vaccines is a growing field that is becoming
increasingly competitive and is subject to rapid technological change. The major
vaccine manufacturers have larger research and development staffs and financial
resources than Vaxcel and, therefore, could devote substantial resources to the
development of vaccine adjuvants/delivery systems, which if successful, would
eliminate the need for Vaxcel's technologies. See "Business of
Vaxcel -- Competition."
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LACK OF MANUFACTURING CAPABILITIES; RELIANCE ON THIRD-PARTY MANUFACTURERS
After the consummation of the Merger, the success of Vaxcel will depend in
part upon its ability to manufacture, or have manufactured through licensees or
other third parties, the supplies of products needed for clinical trials and
commercial purposes. Neither Vaxcel nor CytRx currently has the capability to
manufacture any component of OPTIVAX or the Zynaxis technologies alone or with a
vaccine and therefore Vaxcel must rely on third parties for its manufacturing
needs. If Vaxcel enters into licensing or collaborative arrangements with third
parties related to OPTIVAX or the Zynaxis technologies, it may be required to
rely on such third parties for manufacturing the finished products or seek to
use third-party contract manufacturers to manufacture Vaxcel's requirements of
finished product. There can be no assurance that Vaxcel can obtain and/or
maintain a reliable manufacturing source for its products at a reasonable price.
See "Business of Vaxcel -- Manufacturing."
Vaxcel has an exclusive supply agreement with CytRx to obtain its
requirements of the bulk OPTIVAX copolymers being developed by Vaxcel. The
inability of CytRx or CytRx's designated third-party contract manufacturers to
supply the bulk OPTIVAX copolymers could have a material adverse affect on
Vaxcel.
PRODUCT LIABILITY RISKS
Vaxcel faces an inherent risk of product liability claims in the event that
the use of OPTIVAX or the Zynaxis technologies causes or is alleged to have
caused adverse effects. There can be no assurance that it will avoid significant
product liability exposure that would materially adversely effect the business
or financial condition of Vaxcel.
Based on historical data, a small number of healthy individuals can be
expected to have severe adverse reactions to certain vaccines. In an effort to
compensate injured parties and protect the nation's immunization program, the
U.S. Congress enacted the National Childhood Vaccine Injury Act (the "NCVI Act")
in 1986, which provides for excise-tax financing of a compensation system for
childhood vaccine injuries resulting from immunizations administered after
October 1, 1988. Liability exposure for manufacturers is not totally eliminated
under the NCVI Act, because it only applies to claims resulting from vaccines
administered to children and because a claimant may reject an award and
institute a lawsuit. There can be no assurance that if products manufactured or
sold by Vaxcel or its partners cause or are alleged to have caused adverse
effects, a claimant will not reject an award under the NCVI Act and institute a
lawsuit against a vaccine manufacturer. There can be no assurance that the NCVI
Act will be extended after expiration of its current term, or that, if exposed
to such product liability, Vaxcel will receive any benefit from the NCVI Act or
other similar statutes.
UNCERTAINTY OF PATENT PROTECTION AND PROPRIETARY TECHNOLOGY
After the consummation of the Merger, the success of Vaxcel will depend, in
part, on its ability to obtain patents, maintain trade secret protection and
operate without infringing on the proprietary rights of third parties. There can
be no assurance that any of OPTIVAX or the Zynaxis technology patent
applications will issue, that Vaxcel will develop additional proprietary
products that are patentable, that any patents issued to date will provide any
competitive advantages or will not be challenged by any third parties, or that
the patents of others will not have an adverse effect on the ability of Vaxcel
to do business. Furthermore, there can be no assurance that others will not
independently develop similar products, duplicate any products of Vaxcel or, if
patents are issued to Vaxcel, design around its patented products. Vaxcel could
incur substantial costs in defending itself in lawsuits brought against it
alleging infringement of such patents or in lawsuits by it against another
party.
UNFAVORABLE LICENSING TERMS FOR PLG TECHNOLOGY
Vaxcel will acquire rights to the poly-(DL-lactide-co-glycolide) ("PLG")
microencapsulation technology via the Merger with Zynaxis. Vaxcel considers the
PLG technology to be the most valuable technology to which Zynaxis has rights.
These rights to develop, commercialize, and sublicense the PLG
microencapsulation technology are based on the terms of an exclusive, worldwide
license agreement (the "PLG Agreement"), effective July 1987, in the field of
oral vaccine delivery with Southern Research Institute ("SRI")
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and The University of Alabama at Birmingham Research Foundation ("UAB"). Under
the terms of the PLG Agreement, Vaxcel will be required to pay SRI and UAB 6% of
net sales for the life of the patent or patents or 5% of net sales for 15 years
after the effective date of the PLG Agreement should a patent or patents fail to
issue or be invalidated if third parties (other than ALK) generate any product
sales using the microencapsulation technology. Such a high royalty rate may make
it difficult for Vaxcel to sublicense the PLG microsphere technology to
corporate partners. Also, certain other terms and conditions of the PLG
Agreement are unfavorable to Vaxcel. Although Vaxcel will attempt to renegotiate
the PLG Agreement with SRI and UAB, there can be no assurance that Vaxcel can
renegotiate the PLG Agreement on terms and conditions acceptable to Vaxcel, if
at all. The failure of Vaxcel to successfully renegotiate the PLG Agreement
could have an adverse effect on the business of Vaxcel or cause Vaxcel to
abandon development of the PLG microencapsulation technology.
IMPACT OF GOVERNMENT REGULATION; NO ASSURANCE OF FDA APPROVAL
Pharmaceutical products are subject to regulation under the federal Food,
Drug and Cosmetics Act, and the marketing of vaccines utilizing OPTIVAX and the
Zynaxis technologies will require the approval of the FDA and comparable
regulatory authorities in foreign countries. The approval process can be lengthy
and there can be no assurance that the FDA or any other foreign regulatory
authority will review the vaccines utilizing OPTIVAX or the Zynaxis technologies
on a timely basis. The FDA has established regulations, guidelines and policies
which apply to the preclinical evaluation, clinical testing, manufacture and
marketing of pharmaceutical products. The process of obtaining FDA approval for
a new product generally takes several years and involves the expenditure of
substantial resources. Additional government regulations may be promulgated
which could impose additional costly testing procedures necessary to obtain
regulatory approval and delay regulatory approval of Vaxcel's vaccine
adjuvant/delivery system. Furthermore, some regulatory authorities in foreign
countries may require testing beyond that required by the FDA, and any such
additional testing could result in delays in the approval process as well as
additional expenditures by Vaxcel.
The steps required before a vaccine product can be produced and marketed
for human use in the United States include preclinical studies in animal models,
the filing of an Investigational New Drug ("IND") application, the conduct of
human clinical trials (usually in three separate phases) and the submission and
approval of a Product License Application ("PLA"). The PLA involves considerable
data collection, verification and analysis, as well as the preparation of
summaries of, among other issues, the manufacturing and testing processes,
preclinical studies, and clinical trials. The administration of any product
utilizing OPTIVAX or the Zynaxis technologies may produce undesirable side
effects in humans, which must be reported to the FDA and other regulatory
authorities. Vaxcel or the FDA may suspend clinical trials at any time if it is
believed that the people participating in such trials are being exposed to
unacceptable health risks. Such side effects could interrupt or delay clinical
testing of such products and could ultimately prevent their approval by the FDA
or foreign regulatory authorities for any or all targeted indications. There can
be no assurance that Vaxcel and its collaborators will be able to obtain the
required FDA approvals for any of the vaccines containing OPTIVAX or the Zynaxis
technologies, or that the FDA will not require additional clinical studies in
order to approve the products. In addition, some foreign jurisdictions require
pricing and reimbursement approval before a vaccine can be marketed, which may
require the submission of data from additional studies. There can be no
assurance that pricing or reimbursement approvals will be obtained at all or on
terms that would allow the vaccine to be accepted in the market and profitable
to Vaxcel.
In addition to obtaining FDA approval for each product, the manufacturing
establishment for any vaccine utilizing OPTIVAX and the Zynaxis technologies
used in humans must also be approved by the FDA. The facilities and process for
the manufacture of such vaccine, whether manufactured directly by Vaxcel or by a
third party, are subject to rigorous regulation, including the need to comply
with the FDA's current Good Manufacturing Practice ("GMP") regulations, and may
also be subject to regulation by foreign regulatory authorities. There can be no
assurance that Vaxcel, CytRx or any third-party manufacturer of their products
will be able to comply with such requirements.
In addition to these general manufacturing requirements, samples of
internal testing release data for each manufactured batch of vaccines must be
submitted to the FDA. For certain types of vaccines, samples of
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every batch of vaccine intended for commercial use also must be submitted to the
FDA prior to distribution. In addition, certain vaccines may not be distributed
for commercial use in the United States until written notification of official
release of the batch is received from the FDA. The FDA also has the authority to
request batch samples for all vaccines. The FDA may test a batch before
releasing it to the market, and any such testing could result in delays in the
distribution process. There can be no assurance that the vaccines utilizing
OPTIVAX or the Zynaxis technologies will pass the FDA tests and be released for
human use in a timely manner, or at all.
The FDA frequently revises the rules, regulations and guidelines applicable
to the approval requirements for vaccines and drug products. Vaxcel is
conducting research and development activities based on what it believes are
current FDA regulations. There can be no assurance that the FDA will not change
the approval requirements for products under development by Vaxcel during the
development period or that Vaxcel will be able to comply with any changes in the
approval requirements for such products.
Vaxcel is also subject to regulation under a variety of federal, state and
local statutes including, at the federal level, the Occupational Safety and
Health Act, the Environmental Protection Act, the Nuclear Energy and Radiation
Control Act, the Toxic Substance Control Act and the Resource Conservation and
Recovery Act. There can be no assurance that Vaxcel will be able to comply with
the applicable requirements of these statutes or that such compliance will be at
a reasonable cost.
The development of OPTIVAX and the Zynaxis technologies may have been
supported with federal funds. In addition, Vaxcel has entered into various
contracts with federal agencies by which such federal agencies provide testing
and other services. To the extent any of these activities are subject to the
Technology Transfer Act of 1986 or the Bayh-Dole Act, the federal government
retains a non-exclusive right to make, have made or sell any invention that
results from the activities of the federal government or the use of federal
funds. The scope of these rights and the circumstances under which they may be
exercised is not clear. If the federal government were to exercise any of such
rights in the future, the business and financial condition of Vaxcel could be
materially adversely affected. See "Business of Vaxcel -- Government
Regulation."
HEALTH CARE REFORM INITIATIVES
Health care reform remains an area of increasing national and international
attention. Several proposals to modify the current health care system in the
United States to improve access and control costs currently are being considered
by both federal and state governments. Any such reform measures could adversely
affect the amount of reimbursement available from governmental or private payers
or could affect the ability to set prices for newly approved products. Similar
proposals are being considered by governmental officials in other significant
pharmaceutical markets, including Europe. It is uncertain what proposals will be
adopted or what actions governmental or private payers for health care goods and
services may take in response to proposed or actual legislation in the United
States or other important markets. Any such health care reform proposals may
materially adversely affect the business of Vaxcel.
In addition to these general health care reform proposals, the Clinton
administration has proposed methods to increase the immunization rates of all
children in the United States. The administration has considered in the past
having the federal government become the sole purchaser of vaccines and
distribute them free of charge to all children, regardless of ability to pay.
Some proposals would allow individual states to purchase unlimited supplies of
vaccines at federally negotiated prices under the annual contracts of the
Centers for Disease Control and Prevention. Prices in these public sector
contracts typically are lower than the prices for vaccines that could be
obtained in the private sector. At present, about half of all major childhood
vaccines are purchased using state and federal funds and are distributed to
public health clinics throughout the country. Any dramatic shift in vaccine
purchases from the private sector to the public sector could have a material
adverse impact on the vaccine market in general and on the business of Vaxcel.
NO ASSURANCE OF ADEQUATE REIMBURSEMENT
The success of vaccines utilizing OPTIVAX or the Zynaxis technologies in
the United States and other significant markets will depend in part upon the
extent to which a consumer will be able to obtain
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reimbursement for the cost of such products from government health
administration authorities, private health insurers and other organizations.
Uncertainty exists as to the reimbursement status of any newly approved product.
Government and other third-party payors are increasingly attempting to contain
health care costs by refusing, in some cases, to provide any coverage for uses
of approved products for disease indications for which the FDA has not granted
marketing approval and by limiting both coverage and the level of reimbursement
for new technologies approved for marketing by the FDA. If adequate coverage and
reimbursement levels are not provided by government and third-party payors for
use of products containing OPTIVAX or the Zynaxis technologies, the market
acceptance of the technology would be adversely affected. Even if a product is
approved for marketing, there can be no assurance that patients will have
sufficient resources to pay for the therapy or that governmental or private
payers will provide adequate reimbursement for such product, if at all.
LACK OF MARKETING EXPERIENCE
At present, Vaxcel plans to commercialize vaccines containing OPTIVAX or
the Zynaxis technologies utilizing the sales and marketing capabilities of its
collaborators. However, there can be no assurance that any such arrangement with
collaborators will be available at all or on acceptable terms. If Vaxcel
develops a vaccine without a co-development partner, Vaxcel will need to build a
sales and marketing force or enter into an agreement with a third-party
distributor to successfully market the vaccine. There can be no assurance that
Vaxcel will be able to build a sales force or that its sales and marketing
efforts will be successful.
RECRUITING AND RETAINING OF KEY PERSONNEL
The success of Vaxcel will depend, in part, upon the ability of Vaxcel to
attract and retain highly qualified scientific and management personnel. Vaxcel
faces competition for personnel from other companies, research and academic
institutions, government entities and other organizations. There can be no
assurance that Vaxcel will be successful in hiring or retaining qualified
personnel. The inability of Vaxcel to hire or retain qualified employees could
delay the development and introduction of its products.
NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this Merger, there has been no public market for Vaxcel Common
Stock. Until December 24, 1996, Zynaxis was traded on the Nasdaq SmallCap
Market. Zynaxis is not now actively traded in an established market. After the
consummation of the Merger, there can be no assurance that an active public
market for Vaxcel Common Stock will develop or be sustained. The market prices
for securities of comparable companies have been highly volatile and the market
has experienced significant price and volume fluctuations that are unrelated to
the operating performance of particular companies. Announcements of
technological innovations or new commercial products by Vaxcel or its
competitors, developments concerning proprietary rights, including patents and
litigation matters, publicity regarding actual or potential results with respect
to products or compounds under development by Vaxcel or its collaborative
partners, regulatory developments in both the United States and foreign
countries, public concern as to the efficacy of new technologies, general market
conditions, as well as quarterly fluctuations in Vaxcel's revenues and financial
results and other factors, may have a significant impact on the market price of
the Vaxcel Common Stock. In particular, the realization of any of the risks
described in these "Risk Factors" could have a dramatic and adverse impact on
such market price.
UNCERTAINTY OF LISTING ON THE NASDAQ SMALLCAP MARKET
Vaxcel plans to apply for listing of Vaxcel Common Stock on the Nasdaq
SmallCap Market. Approval of Vaxcel's application is subject to the discretion
of the staff of The Nasdaq Stock Market, Inc. ("Nasdaq"). The staff's approval
will be based in large part upon Vaxcel's satisfaction of quantitative listing
criteria that include minimum requirements for public float, total assets and
the bid price of Vaxcel Common Stock. Currently, a company that wishes to be
considered for listing on the Nasdaq SmallCap Market must have a public float of
at least $1 million, at least $4 million in total assets, and a bid price of at
least $3.00 per share. There can be no assurance that Vaxcel and Vaxcel Common
Stock will satisfy such criteria or that, even if such criteria are satisfied,
the staff of Nasdaq will approve the inclusion of Vaxcel Common Stock in the
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Nasdaq SmallCap Market. If Vaxcel Common Stock is not included in the Nasdaq
SmallCap Market, Vaxcel Common Stock will likely be traded on the
over-the-counter market and holders of Vaxcel Common Stock may have less
liquidity and Vaxcel may be less visible in the public markets than would be the
case if Vaxcel Common Stock were included in the Nasdaq SmallCap Market.
In addition, on November 6, 1996, the Board of Directors of Nasdaq proposed
changes to the quantitative and qualitative criteria for issuers listing on
Nasdaq that would raise the quantitative requirements for listing. The proposed
changes in quantitative standards include: (i) an increase in minimum public
float from $1 million to $5 million, (ii) an increase in minimum assets from $4
million in total assets to $4 million in net tangible assets, and (iii) an
increase in minimum bid price from $3.00 per share to $4.00 per share.
Management of Vaxcel does not expect that Vaxcel and Vaxcel Common Stock would
meet these more stringent listing criteria, if they are adopted prior to the
Closing of the Merger, without significant additional funding from CytRx and
without other changes in the terms of the proposed transactions. After the
passage of the comment period, the Board of Directors of Nasdaq will consider
any comments, make changes to the proposal if warranted, and file the
appropriate rule changes with the SEC for final approval. Vaxcel cannot predict
if or when the proposed changes in the listing criteria will be implemented or
what the new listing criteria, if any, will be. There can be no assurance that
the listing criteria will not be implemented prior to the Closing of the Merger,
preventing the inclusion of Vaxcel Common Stock on the Nasdaq SmallCap Market,
or that the staff of Nasdaq will not exercise its discretion to apply the
proposed listing criteria prior to their adoption. If either occurs, there can
be no assurance that CytRx and Vaxcel will take measures necessary to cause
Vaxcel to satisfy the more stringent listing criteria.
ABSENCE OF DIVIDENDS
Neither Vaxcel nor Zynaxis has paid any cash dividends in the past on its
common stock and Vaxcel does not anticipate paying any such cash dividends in
the foreseeable future. Earnings, if any, will be retained to finance future
growth.
ANTI-TAKEOVER PROTECTIONS
Following the consummation of the Merger, CytRx will own approximately
87.5% of the issued and outstanding shares of Vaxcel Common Stock, assuming that
no holder of Zynaxis Capital Stock exercises its appraisal or objection rights
and before giving effect to the exercise of any Vaxcel Warrants or the CytRx
Warrant. Accordingly, Vaxcel will not be able to engage in any strategic
transactions without the approval of CytRx. Even if CytRx's ownership interest
were substantially reduced below such level, Vaxcel's Certificate of
Incorporation contains certain provisions that could make it more difficult for
a third party to acquire, or discourage a third party from attempting to
acquire, control of Vaxcel. Such provisions could limit the price that certain
investors are willing to pay in the future for shares of Vaxcel Common Stock.
Certain of such provisions allow Vaxcel to issue preferred stock with rights
senior to those of Vaxcel Common Stock and impose various procedural and other
requirements which could make it more difficult for shareholders to effect
certain corporate actions. See "Description of Vaxcel Capital Stock" and "Effect
of the Merger on the Rights of Shareholders."
SPECIAL MEETING OF ZYNAXIS SHAREHOLDERS
DATE, PLACE, TIME, AND PURPOSE
This Proxy Statement is being furnished to the holders of Zynaxis Capital
Stock in connection with the solicitation by the Zynaxis Board of proxies for
use at the Special Meeting. At the Special Meeting, holders of Zynaxis Capital
Stock will be asked to consider and act upon a proposal to approve the
Agreement, the Asset Sales, and the Charter Amendment. The Special Meeting will
be held at 371 Phoenixville Pike, Malvern, Pennsylvania 19355, at .M.,
local time, on , 1997. See "Description of Transaction."
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RECORD DATES, VOTING RIGHTS, REQUIRED VOTES, AND REVOCABILITY OF PROXIES
The close of business on February , 1997 has been fixed as the Record
Date for determining holders of outstanding shares of Zynaxis Capital Stock
entitled to notice of and to vote at the Special Meeting. Only holders of
Zynaxis Capital Stock of record on the books of Zynaxis at the close of business
on the Record Date are entitled to notice of and to vote at the Special Meeting.
As of the Record Date, there were shares of Zynaxis Common Stock issued
and outstanding and held by holders of record and shares of
Zynaxis Preferred Stock issued and outstanding and held by holders of
record.
Holders of Zynaxis Capital Stock are entitled to vote on each matter
considered and voted upon at the Special Meeting. Holders of Zynaxis Common
Stock are entitled to one vote for each share of Zynaxis Common Stock held. When
voting together as a class with holders of Zynaxis Common Stock, holders of
Zynaxis Preferred Stock are entitled to vote on an as converted basis and are,
therefore, entitled to two votes for each share of Zynaxis Preferred Stock held.
When voting separately as a class, holders of Zynaxis Preferred Stock are
entitled to vote one vote for each share of Zynaxis Preferred Stock held.
Shareholders who execute proxies retain the right to revoke them at any time
prior to being voted at the Special Meeting. To hold a vote on any proposal, a
quorum must be assembled. In determining whether a quorum exists at the Special
Meeting for purposes of all matters to be voted on, all votes "for" or
"against," as well as all abstentions, with respect to the proposal receiving
the most such votes, will be counted. The vote required for approval of each of
the Agreement and the Merger contemplated thereby, the Asset Sales, and the
Charter Amendment, is: (i) a majority of the votes cast, whether in person or by
proxy, by all holders of Zynaxis Preferred Stock (voting on an as converted
basis) and by all holders of Zynaxis Common Stock, entitled to vote and voting
together as a class; and (ii) a majority of the votes cast, whether in person or
by proxy, by all holders of Zynaxis Preferred Stock, entitled to vote and voting
as a separate class.
At the Special Meeting, the Charter Amendment will be the first matter put
before the shareholders for consideration and for a vote. If the Charter
Amendment is approved by the shareholders, the Special Meeting will be adjourned
pending the filing of the Articles of Amendment, reflecting the Charter
Amendment, with the Department of State of the Commonwealth of Pennsylvania.
After the filing of the Articles of Amendment and the effectiveness of the
Charter Amendment, the Special Meeting will be reconvened to consider and vote
upon the Agreement and the Merger contemplated thereby, the Asset Sales, and
such other business as may properly come before the Special Meeting. If the
shareholders do not approve the Charter Amendment, the Special Meeting will not
be adjourned and the shareholders will be asked to consider and vote upon the
Agreement and the Merger contemplated thereby, the Asset Sales, and such other
business as may properly come before the Special Meeting.
Shares of Zynaxis Capital Stock represented by properly executed proxies,
if such proxies are received in time and not revoked, will be voted in
accordance with the instructions indicated on the proxies. IF NO INSTRUCTIONS
ARE INDICATED, SUCH PROXIES WILL BE VOTED FOR APPROVAL OF EACH OF THE AGREEMENT
AND THE MERGER CONTEMPLATED THEREBY, THE ASSET SALES, AND THE CHARTER AMENDMENT
AND, IN THE DISCRETION OF THE PROXY HOLDER, AS TO ANY OTHER MATTER WHICH MAY
COME PROPERLY BEFORE THE SPECIAL MEETING. IF NECESSARY, THE PROXY HOLDER MAY
VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE SPECIAL MEETING IN ORDER TO PERMIT
FURTHER SOLICITATION OF PROXIES IN THE EVENT THERE ARE NOT SUFFICIENT VOTES TO
APPROVE THE FOREGOING PROPOSALS AT THE TIME OF THE SPECIAL MEETING.
A Zynaxis shareholder who has given a proxy may revoke it at any time prior
to its exercise at the Special Meeting by (i) giving written notice of
revocation to the Secretary of Zynaxis, (ii) properly submitting to Zynaxis a
duly executed proxy bearing a later date or (iii) attending the Special Meeting
and voting in person. All written notices of revocation and other communications
with respect to revocation of proxies should be addressed as follows: Zynaxis,
Inc., 371 Phoenixville Pike, Malvern, Pennsylvania 19355; Attention: Michael A.
Christie, Secretary.
The directors and executive officers of Zynaxis and their affiliates
beneficially owned, as of the Zynaxis Record Date, shares (or
approximately % of the issued and outstanding shares) of Zynaxis Capital
Stock of which shares were shares of Zynaxis Preferred Stock (or
approximately % of the issued and outstanding shares of Zynaxis Preferred
Stock). EACH MEMBER OF THE ZYNAXIS BOARD INTENDS TO
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VOTE THOSE SHARES OF ZYNAXIS CAPITAL STOCK OVER WHICH SUCH MEMBER HAS VOTING
AUTHORITY (OTHER THAN IN A FIDUCIARY CAPACITY) IN FAVOR OF THE AGREEMENT AND THE
MERGER CONTEMPLATED THEREBY, AND THE ASSET SALES AND THE CHARTER AMENDMENT,
RESPECTIVELY.
SOLICITATION OF PROXIES
Proxies may be solicited by the directors, officers, and employees of
Zynaxis by mail, in person, or by telephone or telegraph. Such persons will
receive no additional compensation for such services. Zynaxis may make
arrangements with brokerage firms and other custodians, nominees, and
fiduciaries, if any, for the forwarding of solicitation materials to the
beneficial owners of Zynaxis Capital Stock held of record by such persons. Any
such brokers, custodians, nominees, and fiduciaries will be reimbursed for the
reasonable out-of-pocket expenses incurred by them for such services. All
expenses associated with the solicitation of proxies, other expenses associated
with the Special Meeting, and expenses related to the printing and mailing of
this Proxy Statement, will be shared by Vaxcel and Zynaxis as provided in the
Agreement. See "Description of the Transaction -- Expenses and Fees."
RECOMMENDATION
THE ZYNAXIS BOARD HAS UNANIMOUSLY APPROVED THE AGREEMENT AND THE MERGER
CONTEMPLATED THEREBY, THE ASSET SALES, AND THE CHARTER AMENDMENT, BELIEVES THAT
THE PROPOSAL TO APPROVE THE AGREEMENT AND THE MERGER CONTEMPLATED THEREBY IS IN
THE BEST INTERESTS OF ZYNAXIS AND ITS SHAREHOLDERS, AND UNANIMOUSLY RECOMMENDS
THAT THE ZYNAXIS SHAREHOLDERS VOTE FOR APPROVAL OF EACH OF THE PROPOSALS TO
APPROVE THE AGREEMENT AND THE MERGER CONTEMPLATED THEREBY, THE ASSET SALES, AND
THE CHARTER AMENDMENT.
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DESCRIPTION OF TRANSACTION
The following information describes certain aspects of the Merger. This
description does not purport to be complete and is qualified in its entirety by
reference to the Appendices hereto, including the Agreement, which is attached
as Appendix A to this Proxy Statement and incorporated herein by reference. All
shareholders are urged to read the Appendices in their entirety.
GENERAL
Pursuant to the Agreement, at the Effective Time, Vaxcel Merger Sub will
merge with and into Zynaxis, with the effect that Zynaxis will be the surviving
corporation resulting from the Merger, and will continue to conduct its business
and operations as a wholly owned subsidiary of Vaxcel. As a result of the
Merger, the former shareholders of Zynaxis will own approximately 12.5% of the
outstanding shares of Vaxcel Common Stock, and CytRx will own approximately
87.5% of such shares (assuming no exercise of options or warrants with respect
to Vaxcel).
At the Effective Time, (i) each share of Zynaxis Common Stock (excluding
shares held by any Zynaxis company or any Vaxcel company, and excluding shares
held by shareholders who perfect their statutory dissenters' rights under
Subchapter 15D of the PBCL or statutory objection rights under Section 2546 of
the PBCL) issued and outstanding immediately prior to the Effective Time will be
exchanged for the right to receive a number of shares of Vaxcel Common Stock
equal to the Exchange Ratio, (as defined in the Agreement), estimated to be
approximately .0948, with cash being paid in lieu of issuing fractional shares,
and (ii) each share of Zynaxis Preferred Stock (excluding shares held by any
Zynaxis company or any Vaxcel company, and excluding shares held by shareholders
who perfect their statutory dissenters' rights under Subchapter 15D of the PBCL
or statutory objection rights under Section 2546 of the PBCL) issued and
outstanding immediately prior to the Effective Time will be exchanged for the
right to receive a number of shares of Vaxcel Common Stock equal to two times
the Exchange Ratio, with cash being paid in lieu of issuing fractional shares.
In addition, at the Effective Time, upon consummation of the Merger, CytRx
will contribute to Vaxcel the Senior Credit Facility and the Cash Payment in an
amount equal to the difference, as of the Closing, between $4,000,000 and the
sum of: (i) the aggregate principal and interest balance outstanding under the
Senior Credit Facility; and (ii) (a) the Per Share Price, as defined in the
Agreement and described below, multiplied by (b) the number of votes entitled to
be cast by the holders of Zynaxis Capital Stock, if any, who elect to exercise
their statutory dissenters' rights under Subchapter 15D of the PBCL or their
objection rights under Section 2546 of the PBCL in excess of three percent (3%)
of the votes that could be cast by all holders of Zynaxis Capital Stock voting
together as a single class. In exchange for the contribution of the Senior
Credit Facility and the Cash Payment, Vaxcel will deliver to CytRx: (i) the
CytRx Warrant; (ii) 1,374,996 shares of Vaxcel Common Stock; and (iii) a number
of shares of Vaxcel Common Stock equal to the product of the Exchange Ratio, as
defined in the Agreement and described below, times the number of votes entitled
to be cast by the shareholders of Zynaxis Capital Stock, if any, who elect to
exercise their statutory dissenters' rights under Subchapter 15D of the PBCL or
their statutory objection rights under Section 2546 of the PBCL.
No fractional shares of Vaxcel Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share interest to
which any Zynaxis shareholder would be entitled upon consummation of the Merger,
in an amount equal to such fractional part of a share of Vaxcel Common Stock
divided by the Exchange Ratio and multiplied by the Per Share Price.
As of the Record Date, Zynaxis had shares of Zynaxis Common Stock
issued and outstanding and shares of Zynaxis Preferred Stock issued and
outstanding. It is anticipated that upon consummation of the Merger, Vaxcel
would issue approximately 2,750,000 shares of Vaxcel Common Stock, excluding
shares subject to assumed options or warrants. Accordingly, Vaxcel would then
have issued and outstanding approximately 11,000,000 shares of Vaxcel Common
Stock based on the number of shares of Vaxcel Common Stock issued and
outstanding on December 31, 1996.
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BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. Zynaxis was formed in 1988 for the purpose of
the development and commercialization of cellular diagnostic products for
disease monitoring and new delivery systems for therapeutic drugs. Since its
inception, Zynaxis has sustained continuing operating losses as it devoted
substantially all of its resources to the research and development of its
products. Because Zynaxis has not received significant revenues from the sale of
any of its products, Zynaxis is dependent on financial investors and strategic
corporate partnerships and collaborations for cash to fund its operations.
Zynaxis received its first funding from venture capital investors. Zynaxis
completed an initial public offering of Zynaxis Common Stock in 1992, but was
unable to sell additional securities at acceptable prices in 1993 or 1994. As a
result, Zynaxis was forced to discontinue its cellular diagnostic products
business in January 1995, and limit its focus to its therapeutic delivery
systems. Zynaxis' merger with Secretech in July 1995 provided Zynaxis with
additional capital which was contributed by the then existing stockholders of
Zynaxis and Secretech. Although Secretech had also been unprofitable since
inception, Zynaxis believed that acquiring the Secretech oral vaccine delivery
technology would enhance the ability of Zynaxis to attract capital in the
short-term and collaborative partners in the long-term.
During the latter part of 1995, Zynaxis established a strategic goal of
raising cash through corporate partnerships and collaborations, and the sale of
assets unrelated to its core drug delivery technologies. Although Zynaxis
devoted its best efforts toward achieving this goal, the company was unable to
raise the required capital. In September 1995, Zynaxis entered into a
development and licensing agreement with ALK and, as of the end of 1996, ALK has
paid Zynaxis $1,000,000 under the agreement. ALK, however, has no obligation to
make any additional payments until specified regulatory approvals have been
obtained, and Zynaxis has not been able to enter into any other partnerships or
collaborations. The Zynaxis Board has been unable to obtain any assurance that
Zynaxis will be able to enter into any of such strategic alliances in the
future.
In October 1995, Zynaxis sold the assets related to its discontinued
diagnostics business and, in July 1996, Zynaxis signed a letter of intent to
sell the Cauldron division assets to Seloc AG ("Seloc"), a subsidiary of Schwarz
Pharma. Seloc made nonrefundable, up-front payments to Zynaxis upon execution of
the letter of intent. On August 23, 1996, however, Seloc terminated its
agreement in principle to purchase the Cauldron division. Although Zynaxis has
renewed discussions with purchasers previously interested in the Cauldron
division and initiated discussions with others, Zynaxis has not been able to
enter into any agreement to sell the division and the Zynaxis Board has been
unable to obtain any assurance that Zynaxis will be able to enter into any such
agreement in the future.
Zynaxis' deteriorating cash position became critical during the latter part
of 1996. On August 21, 1996, Southern Research Technologies, Inc. ("SRT"), the
company responsible for administering and commercializing SRI's intellectual
property, notified Zynaxis that Zynaxis had failed to pay approximately $5,000
in patent expenses and $70,000 in minimum license fees due under the PLG
Agreement. On August 27, 1996, SRT declared Zynaxis in default under the PLG
Agreement and that the agreement would be terminated unless Zynaxis made the
delinquent payments before the end of the 90-day cure period stated in the
agreement. Also, on August 27, 1996, Nasdaq notified Zynaxis that the Zynaxis
Common Stock failed to meet the criteria for continued listing on the Nasdaq
SmallCap Market and that, if Zynaxis was unable to demonstrate to the
satisfaction of Nasdaq before November 27, 1996 that Zynaxis Common Stock would
maintain a minimum bid price of $1.00 or, as an alternative, that Zynaxis would
maintain capital and surplus of $2,000,000 and a market value of public float of
$1,000,000, then Nasdaq would delist the Zynaxis Common Stock. Finally, on
October 2, 1996, Fox Realty Co. notified Zynaxis that Zynaxis had failed under
the lease agreement for the Zynaxis Malvern facility to pay approximately
$93,988 due for the months of September and October 1996, and threatened to
declare the lease in default and accelerate the remaining payments if Zynaxis
did not make the delinquent payments before October 15, 1996.
In response to the problems caused by Zynaxis' deteriorating cash position,
the Zynaxis Board implemented a three-part plan. First, Zynaxis reduced its
workforce by 40%, thereby reducing its operations to its Cauldron division,
research and development which was funded through Small Business Innovative
Research Grants ("SBIRs") and other essential corporate functions. Second,
Zynaxis entered into an
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exclusive license and purchase option agreement with Phanos for Zynaxis'
Zyn-Linker(R) technology. Zynaxis had previously granted Phanos a license for
certain diagnostic applications of its Zyn-Linker(R) technology. Upon execution
of this agreement, Zynaxis received an initial deposit of $50,000, of which
$5,000 is non-refundable. In October 1996, Zynaxis received an additional
refundable deposit of $150,000. If Phanos elects to exercise its purchase
option, it will be required to pay an additional $525,000 for the Zyn-Linker(R)
technology. If, however, Phanos elects not to exercise its purchase option,
Zynaxis must repay Phanos $195,000. The repayment obligation is secured by the
patents covering the Zyn-Linker(R) technology. The Zynaxis Board has been unable
to obtain any assurance that Phanos will exercise the purchase option for the
Zyn-Linker(R) technology. Third, Zynaxis began investigating other financing
arrangements, including a significant private placement of its equity
securities, a business combination through a merger, acquisition or joint
venture and technology sales and acquisitions. Because of its immediate need for
cash, Zynaxis focused specifically on merger opportunities that offered
short-term financing (a bridge loan) sufficient to allow Zynaxis to continue
operating as a going concern until a merger could be consummated. Martyn D.
Greenacre, the President and Chief Executive Officer of Zynaxis, contacted a
number of potential merger partners and investigated opportunities for
short-term financing using the assets of the Cauldron division as collateral.
Representatives of Zynaxis and Vaxcel met initially to discuss
opportunities for a strategic alliance. Although representatives of the
companies had engaged in general technical discussions of their respective
technologies in previous years, Mr. Greenacre and Paul J. Wilson, the President
and Chief Executive Officer of Vaxcel, met in Malvern, Pennsylvania on May 21,
1996, to review Zynaxis' drug and vaccine delivery technologies for the purpose
of exploring a strategic alliance between the two companies. On June 10, 1996,
the executives held a similar meeting in Norcross, Georgia during which they
reviewed the Vaxcel vaccine technologies.
Subsequently, representatives of Zynaxis and CytRx met to discuss
opportunities for a merger of Zynaxis with a subsidiary of CytRx. On July 19,
1996, Jack J. Luchese, the Chairman of the Board, President and Chief Executive
Officer of CytRx, Frank Casieri, President and Chief Executive Officer of
Proceutics, Inc. ("Proceutics"), and Howard Wachtler, an advisor to CytRx, met
with Mr. Greenacre and Frank Conway, the Zynaxis Controller, to discuss such a
merger. Proceutics is a wholly-owned subsidiary of CytRx that provides contract
research pre-clinical development services to the pharmaceutical industry.
Messrs. Luchese, Wachtler, Greenacre and Conway met again on August 8, 1996, to
review additional information related to Zynaxis for the purpose of allowing
CytRx to formulate a formal merger proposal. On August 12, 1996, Messrs. Luchese
and Wachtler presented a proposal for the merger of Zynaxis and Proceutics to
Mr. Greenacre, Stephen R. Reidy, a director of Zynaxis and general partner of
Euclid Associates III, L.P., the general partner of a substantial investor in
Zynaxis, and John F. Chappell, a director of Zynaxis and President of Plexus
Ventures, Inc., which is an investor in Zynaxis.
At the same time that representatives of Zynaxis were meeting with
representatives of CytRx and its subsidiaries, Mr. Greenacre continued to pursue
opportunities presented by other merger partners, and potential purchasers of
the Zynaxis technologies. The results of his efforts were reported to and
considered by the Zynaxis Board. On August 21, 1996, Messrs. Luchese, Wachtler
and Greenacre held a telephone conference during which Mr. Greenacre expressed
the opinion of the Zynaxis Board members that the August 12 offer be deferred
pending completion of certain preconditions to the offer, including the sale of
Cauldron to Seloc.
Messrs. Luchese, Wachtler, Greenacre and Conway met on September 4, 1996 to
discuss a revised proposal which recognized the withdrawal of Seloc from the
purchase of the Cauldron division and the need of Zynaxis for short-term
financing. The proposal set forth alternate deal structures for a merger of
Zynaxis with Proceutics and a merger of Zynaxis with Vaxcel. The Zynaxis Board
met on September 10, 1996 to review the revised proposal and requested
additional information. The Zynaxis Board also considered a proposal by another
potential merger partner. The next day, September 11, 1996, Messrs. Lyle A.
Hohnke, Dennis P. Schafer, and Messrs. Chappell and Reidy, each a director of
Zynaxis, and Messrs. Greenacre, Luchese and Wachtler held a telephone conference
to discuss the revised proposal and to review additional information about the
Vaxcel technology. The Zynaxis Board expressed a number of concerns about the
proposal to
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Messrs. Luchese and Wachtler. On September 12, 1996, the Zynaxis Board met again
by teleconference to discuss the revised proposal and voted to reject the
proposal.
Messrs. Luchese and Wachtler then made a new proposal to Messrs. Greenacre
and Conway for the merger of Zynaxis with Vaxcel on economic terms and
conditions substantially the same as those set forth in the Agreement. Mr.
Greenacre agreed to discuss the proposal with the Zynaxis Board. On September
13, 1996, the Zynaxis Board met by teleconference to consider the new proposal
and authorized Mr. Greenacre to proceed to negotiate detailed terms for a merger
with Vaxcel.
During the second half of September and early October, representatives of
CytRx, Vaxcel, Zynaxis and their respective legal and financial counsel met both
face-to-face and by teleconference to negotiate the terms of the merger
agreement and to carry out their respective "due diligence" reviews. On October
14, 1996, the Zynaxis Board met by teleconference to review the draft terms of
the Agreement. While the terms of the merger remained subject to modifications
for legal reasons, the Zynaxis Board reaffirmed its support of the proposed
merger. Following further discussions between both parties to the merger, final
documents were presented independently to the Boards of Zynaxis, Vaxcel and
CytRx on November 7, 1996. Each of the Boards unanimously recommended approval
of the Agreement and the transactions contemplated thereby subject to
satisfactory completion of certain events, including, but not limited to the
agreement of all holders of Zynaxis Preferred Stock to convert their Zynaxis
Preferred Stock to Vaxcel Common Stock in the Merger, the agreement among
certain shareholders to vote in favor of the Merger, and the agreement of
Zynaxis' landlord to amend its lease. CytRx, Vaxcel, Vaxcel Merger Sub and
Zynaxis entered into the Agreement on the morning of December 6, 1996, and
announced the Agreement that day through a press release.
Knowing that it would be able to fund its operations with the cash
available under the Senior Credit Facility, Zynaxis made the delinquent payments
due under the PLG Agreement and the Malvern lease. On a number of occasions in
September and October 1996, Zynaxis contacted personnel at Nasdaq in order to
attempt to persuade Nasdaq not to delist Zynaxis Common Stock pending the
closing of the Merger because it was anticipated that as a result of the Merger
shareholders of Zynaxis would receive stock satisfying Nasdaq's continued
listing criteria. On October 11, 1996, Zynaxis submitted a written summary of
the proposed transaction and a written request not to delist Zynaxis Common
Stock prior to consummation of the Merger. Zynaxis was informed that in order to
consider the continued listing of Zynaxis Common Stock, Nasdaq would need to
receive and review a more detailed written proposal from Zynaxis regarding
Zynaxis' plans for bringing its common stock into compliance with the listing
criteria of the Nasdaq SmallCap Market. On November 27, 1996, Zynaxis sent
Nasdaq a package notifying Nasdaq of the expected execution of the Agreement,
explaining the details of the Merger, and repeating its request that the listing
of Zynaxis Common Stock on the Nasdaq SmallCap Market be continued until
consummation of the Merger. By letter dated December 14, 1996, Nasdaq informed
Zynaxis that, notwithstanding the Merger, Zynaxis would not be afforded an
extension of time in which to achieve compliance with the continued listing
requirements of the Nasdaq SmallCap Market and that the securities of Zynaxis
would be delisted from the Nasdaq SmallCap Market effective with the opening of
business on Tuesday, December 24, 1996.
Zynaxis' Reasons for the Merger. The Zynaxis Board believes that, if the
Merger is not consummated, then it is highly probable that Zynaxis will cease to
exist as a going concern. The Zynaxis Board believes that, if the Merger is not
consummated, Zynaxis may not have cash sufficient to fund its ongoing operations
or to repay the funds that will have been borrowed under the Senior Credit
Facility. If Zynaxis defaults under the Senior Credit Facility, then CytRx may
exercise its rights as a secured creditor under the Uniform Commercial Code (as
adopted in the State of Georgia) with respect to certain assets of Zynaxis,
including, but not limited to, foreclosing on Zynaxis' rights in its vaccine
delivery technologies. In addition, although Zynaxis contacted a number of
interested merger partners and began negotiations with several of them, Vaxcel
was the only one willing to enter into a transaction on terms acceptable to the
Zynaxis Board. The terms of the Agreement and the other Transaction Documents
provide Zynaxis with short-term financing that allows Zynaxis to continue its
operations until the Merger can be consummated, and provides the Zynaxis
shareholders with the opportunity to participate in the equity growth that may
result from the development and commercialization of the Zynaxis vaccine
delivery technologies. The Zynaxis Board believes that Vaxcel's and Zynaxis'
vaccine technologies are complementary and may afford the combined company
greater access
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to corporate development partnerships generating research and development
funding as well as greater access to capital markets than Zynaxis would have had
by remaining independent.
In reaching its conclusion, the Zynaxis Board also considered the
disadvantages of the Merger, including the following: (i) the highly dilutive
nature of the proposed Merger; (ii) the loss of control by Zynaxis' shareholders
and management; and (iii) the concentration of risk in the area of vaccine
technology as opposed to the diversification of risk attributable to having both
drug and vaccine development programs. The Zynaxis Board believes that these
disadvantages were outweighed by the advantages of the transaction, and has
determined that the Merger and Asset Sales are in the best interests of Zynaxis
and its shareholders. Accordingly, the Zynaxis Board unanimously approved and
adopted the Agreement and the Merger contemplated thereby, the Asset Sales, and
the Charter Amendment.
THE ZYNAXIS BOARD RECOMMENDS THAT THE ZYNAXIS SHAREHOLDERS VOTE IN FAVOR OF
THE CHARTER AMENDMENT, THE AGREEMENT AND THE MERGER CONTEMPLATED THEREBY, AND
THE ASSET SALES.
In reaching its conclusions, the Zynaxis Board considered a number of
factors, including, among other things, the terms and conditions of the
Agreement, information with respect to the financial condition, business
operations and prospects of both Zynaxis and Vaxcel on both a historical and
prospective basis, including information reflecting the two companies on a pro
forma basis, and the views and opinions of its management.
Vaxcel's Reasons for the Merger. Vaxcel has rights to injectable vaccine
delivery technology, but it does not currently have rights to oral or mucosal
delivery technology or a significant public holding of its stock that would
provide a liquid market for those shares. The Vaxcel Board of Directors believes
that the Zynaxis oral technologies may have commercial application for many
marketed vaccines currently administered by parenteral injection, as well as
certain new vaccines under development. The Zynaxis oral technologies can be
administered alone or in combination with other vaccine carriers, delivery
systems, and adjuvants; and oral immunization is an attractive alternative to
injectable administration of vaccines, particularly when mucosal immunity is
important. Accordingly, the Merger is consistent with Vaxcel's goal of building
its competitive strength through the expansion of its vaccine delivery portfolio
and enhancing its shareholder value by increasing liquidity for the Vaxcel
Common Stock. The Board of Directors of Vaxcel also considered other advantages
of the Merger, such as the fact that Vaxcel will acquire a license agreement
with ALK.
The Vaxcel Board also identified and considered certain potential
disadvantages related to the Merger with Zynaxis. The disadvantages included,
among others, (i) the uncertainty regarding divestiture of the Cauldron
division; (ii) the cost of satisfying the current and expected liabilities of
Zynaxis; and (iii) the absence of cash that Vaxcel could have obtained through
an initial public offering.
THE MERGER
Subject to the terms and conditions of the Agreement, at the Effective
Time, Vaxcel Merger Sub will be merged with and into Zynaxis in accordance with
the provisions of Section 1921 et seq. of the PBCL and Sections 14-2-1101 and
14-2-1107 of the Georgia Business Corporation Code ("GBCC") and with the effects
provided in Section 1929 of the PBCL and Section 14-2-1106 of the GBCC. Zynaxis
will be the surviving corporation resulting from the Merger and will become a
wholly owned subsidiary of Vaxcel and will continue to be governed by the laws
of the Commonwealth of Pennsylvania.
EXCHANGE RATIO
Assuming no changes in the capitalization of either Vaxcel or Zynaxis, the
Exchange Ratio is estimated to be approximately .0948. The Exchange Ratio is
calculated based upon approximately 11,000,000 total shares outstanding of
Vaxcel Common Stock subsequent to the Closing, with approximately 9,625,000
being held by CytRx and approximately 1,375,000 being held by the former Zynaxis
shareholders.
Generally, the Exchange Ratio is defined as: (i) 1,375,000, divided by (ii)
the number of shares of Zynaxis Common Stock outstanding immediately prior to
the Effective Time, giving effect to all issuances of common stock to which
Zynaxis is committed as of the time of the Closing (other than issuances to
occur upon the exercise of outstanding stock options and warrants) including but
not limited to: (a) the number of
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shares of Zynaxis Capital Stock issuable upon conversion of all outstanding
shares of Zynaxis Preferred Stock, and (b) the number of shares of Zynaxis
Capital Stock issuable upon conversion of the principal and accrued interest of
the Zynaxis Notes at the Per Share Price.
Specifically, under the Agreement, the Exchange Ratio is defined as: (i)
the number of shares of Vaxcel Common Stock held by CytRx immediately prior to
the Closing, giving effect to the issuance of shares to CytRx in connection with
the Closing pursuant to the Agreement, divided by (ii) 7 and further divided by
(iii) the sum of (a) the number of shares of Zynaxis Common Stock outstanding
immediately prior to the Closing, giving effect to all issuances of common stock
to which Zynaxis is committed as of the time of the Closing other than issuances
to occur upon the exercise of outstanding stock options and warrants including
but not limited to: (1) the delivery of 34,548 shares of Zynaxis Common Stock to
certain officers and employees of Plexus Ventures, Inc. pursuant to the
settlement agreement set forth in the letter from Zynaxis to Plexus Ventures,
Inc. dated October 10, 1996, and (2) the issuance of approximately 22,000
additional shares of Zynaxis Common Stock to the Zynaxis 401(k) plan for the
fourth quarter of 1996; (b) two times the number of shares of Zynaxis Preferred
Stock outstanding as of the Closing; and (c) 1,320,706. The number 1,320,706
will be adjusted for splits and reverse splits of Vaxcel Common Stock.
PER SHARE PRICE
Assuming no changes in the capitalization of either Vaxcel or Zynaxis, the
Per Share Price is estimated to be approximately $.2758. The Per Share Price
represents the value per share assigned to Zynaxis Capital Stock in the Merger
transaction. Both CytRx and the Zynaxis shareholders will receive approximately
1,375,000 shares of Vaxcel Common Stock upon consummation of the Merger. As the
CytRx contribution will principally be in the form of cash, the transaction
price per share (of Vaxcel Common Stock) is easily determined as $4,000,000
divided by 1,375,000, or $2.909. To arrive at the Per Share Price of Zynaxis
Common Stock, the Vaxcel per share price is multiplied by the Exchange Ratio
(estimated to be approximately .0948), yielding an estimated Per Share Price of
.2758.
Specifically, in the Agreement, the Per Share Price is defined as: (i)
$4,000,000, divided by (ii) the sum of (a) the number of shares of Zynaxis
Common Stock outstanding immediately prior to the Closing, giving effect to all
issuances of Zynaxis Common Stock to which Zynaxis is committed as of the time
of the Closing other than issuances to occur upon the exercise of outstanding
stock options and warrants including but not limited to: (1) the delivery of
34,548 shares of Zynaxis Common Stock to certain officers and employees of
Plexus Ventures, Inc. pursuant to the settlement agreement set forth in the
letter from Zynaxis to Plexus Ventures, Inc. dated October 10, 1996, and (2) the
issuance of approximately 22,000 additional shares of Zynaxis Common Stock to
the Zynaxis 401(k) plan for the fourth quarter of 1996; (b) two times the number
of shares of Zynaxis Preferred Stock outstanding immediately prior to the
Closing; and (c) 1,320,706. The number 1,320,706 will be adjusted for splits and
reverse splits of Vaxcel Common Stock.
THE TRANSACTION DOCUMENTS
Simultaneously with the execution of the Agreement: (i) Zynaxis and CytRx
entered into the Senior Credit Facility; (ii) Zynaxis and CytRx entered into the
Liquidation Agreement, which provides for CytRx to serve as Zynaxis' agent in
the Asset Sales; (iii) Zynaxis, CytRx, Vaxcel, and the holders of all of the
outstanding shares of Zynaxis Preferred Stock, who also hold certain Zynaxis
Warrants, entered into the Preferred Stock and Warrant Agreement, conditioned
upon the consummation of the Merger, making certain agreements with respect to
their rights and converting the Zynaxis Warrants, upon consummation of the
Merger, into Vaxcel Warrants; (iv) Zynaxis, CytRx and Vaxcel entered into the
Note Exchange Agreement with Euclid and S.R. One, Ltd., who hold Zynaxis Notes,
conditioned upon the consummation of the Merger, converting the Zynaxis Notes,
upon consummation of the Merger, into the right to receive shares of Vaxcel
Common Stock; (v) CytRx and certain holders of Zynaxis Capital Stock entered
into the Shareholder Voting Agreements granting CytRx an irrevocable proxy to
vote the shares held by such shareholders in favor of the Agreement and the
Merger contemplated thereby, the Asset Sales, and the Charter Amendment, and
(vi) Vaxcel and Zynaxis entered into the Technology Development Agreement
concerning the development, by Vaxcel, of certain technologies owned by or
licensed to Zynaxis. Each of the Senior Credit Facility, the Liquidation
Agreement, the Preferred Stock and Warrant Agreement, the Note Exchange
Agreement, the
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Shareholder Voting Agreements, and the Technology Development Agreement are
incorporated into the Agreement as exhibits to the Agreement.
The Senior Credit Facility. Simultaneously with the execution of the
Agreement, in order to provide necessary funding for the operations of Zynaxis
pending the Merger, Zynaxis and CytRx entered into a Secured Loan Agreement,
pursuant to which CytRx agreed to lend up to $2,000,000 (the "Loan") to Zynaxis.
Repayment of the Loan is evidenced by the Senior Secured Note, and is subject to
a Security Agreement which grants to CytRx a security interest in all of the
assets of Zynaxis and its subsidiaries. In addition, to secure the Senior
Secured Note, Zynaxis Vaccine Technologies, Inc. ("ZVT"), a Pennsylvania
corporation and a wholly owned subsidiary of Zynaxis, entered into a Collateral
Assignment of License Agreement, a Guaranty and a Security Agreement ("ZVT
Security Agreement"). The Collateral Assignment of License Agreement grants a
security interest to CytRx in all of ZVT's right, title, and interest in, to and
under a certain license agreement, as amended, dated July 1, 1987, by and among
ZVT, SRI and UAB, licensing certain technology. The ZVT Security Agreement
grants CytRx a security interest in all of the assets of ZVT.
The Liquidation Agreement. The Zynaxis Board has appointed CytRx as its
agent for the sale of certain assets listed in the Liquidation Agreement at the
prices, and the settlement of the liabilities listed in the Liquidation
Agreement for the amounts, identified in the Liquidation Agreement. The Zynaxis
Board (and any applicable committees thereof) also have approved (i) an
operating budget for the period between the date of the Liquidation Agreement
and the Closing, (ii) certain agreements to be entered into by Zynaxis and CytRx
with Martyn D. Greenacre and Michael A. Christie, and (iii) an agreement between
QED Technologies, L.P. ("QED") and Zynaxis covering QED's relationship as
Zynaxis' agent for the sale of the Cauldron division.
Zynaxis has committed to exert its commercially reasonable best efforts to
sell the assets and to cooperate with CytRx in its efforts to assist Zynaxis in
selling the assets. Zynaxis has committed to approve and execute documents
evidencing and perform any agreement negotiated by Zynaxis or CytRx with any
prospective purchaser of any asset if (i) the purchase price is no lower than
the amount and is consistent with the terms set forth in the Liquidation
Agreement, and (ii) the other terms and conditions of the transaction are not
less favorable to Zynaxis in any material respect than the terms and conditions
of similar transactions.
Zynaxis has committed to exert its commercially reasonable best efforts to
settle the liabilities and to cooperate with CytRx in its efforts to assist
Zynaxis in settling the liabilities. Zynaxis has committed to approve and
execute documents evidencing and perform any agreement negotiated by Zynaxis or
CytRx with any creditor for any liability, if (i) the cash payment required to
be paid by Zynaxis to such creditor is no greater than the settlement amount and
is consistent with the terms set forth for such liability in the Liquidation
Agreement, and (ii) the other terms and conditions of the transaction are not
less favorable to Zynaxis in any material respect than the terms and conditions
of similar transactions.
The Liquidation Agreement further provides that, subject to approval by the
Committee (as defined below), which approval will not be unreasonably withheld,
Zynaxis will approve and execute documents evidencing and perform any agreement
negotiated by CytRx with any counsel, accountants, appraisers, brokers and other
advisors in connection with the transactions (all for the account of Zynaxis),
if (i) such person is not an affiliate of CytRx, and (ii) the terms and
conditions of such agreement, taken as a whole, are fair to Zynaxis.
In connection with CytRx's activities on Zynaxis' behalf, Zynaxis has
agreed to cooperate with CytRx, to furnish or cause to be furnished to CytRx
such information and data as CytRx may reasonably request, and to give CytRx
reasonable access to Zynaxis' officers, directors, employees, appraisers and
independent accountants.
The Zynaxis Board has established a committee (the "Committee") of the
Board consisting of John F. Chappell, Stephen K. Reidy and Martyn D. Greenacre,
which has the full authority of the Board to authorize the transactions and the
institution and prosecution of actions (including arbitration proceedings)
relating to the transactions contemplated by the Liquidation Agreement. The
Committee will confer with CytRx at such times as CytRx reasonably requests.
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The Liquidation Agreement also provides that Zynaxis will reimburse CytRx
promptly for all reasonable out-of-pocket expenses, including reasonable fees
and expenses of CytRx's counsel, incurred in connection with the rendering of
CytRx services under the Liquidation Agreement. Zynaxis also has agreed to
indemnify CytRx in accordance with certain indemnification provisions.
CytRx may terminate the Liquidation Agreement at any time upon written
notice, without liability or continuing obligation to Zynaxis. Zynaxis may not
terminate the Liquidation Agreement unless and until the Agreement is
terminated.
Preferred Stock and Warrant Agreement. Simultaneously with the execution
of the Agreement, Zynaxis, CytRx, Vaxcel, and the holders of Zynaxis Preferred
Stock entered into the Preferred Stock and Warrant Agreement to modify, as of
the Effective Time, the rights of the holders of Zynaxis Preferred Stock.
Prior to the execution of the Preferred Stock and Warrant Agreement, the
rights of holders of Zynaxis Preferred Stock were governed by a Preferred Stock
and Warrant Purchase Agreement dated March 29, 1995, as amended (the "Preferred
Stock and Warrant Purchase Agreement"), and the Statement with Respect to Shares
filed by Zynaxis in the Department of State of the Commonwealth of Pennsylvania
on April 6, 1995 ("Statement with Respect to Shares"). Pursuant to the Preferred
Stock and Warrant Agreement, the holders of Zynaxis Preferred Stock agreed that
the Preferred Stock and Warrant Purchase Agreement and all rights of the holders
of Zynaxis Preferred Stock thereunder will terminate upon consummation of the
Merger.
The Preferred Stock and Warrant Agreement also provides that each of the
holders of Zynaxis Preferred Stock elects that the consummation of the
transactions contemplated by the Agreement and the Transaction Documents,
including but not limited to the Liquidation Agreement, will not be deemed a
liquidation for purposes of the Zynaxis Articles of Incorporation. In addition,
each of the holders of Zynaxis Preferred Stock consented to the Senior Credit
Facility and all liens, pledges, mortgages, security interests and other
encumbrances to which the assets or properties of Zynaxis may become subject as
part of the Senior Credit Facility.
Pursuant to the Preferred Stock and Warrant Agreement, each of the holders
of Zynaxis Preferred Stock agreed that upon consummation of the Merger, each
Zynaxis Warrant held by the holders of Zynaxis Preferred Stock will be exchanged
for a Vaxcel Warrant for a number of shares of Vaxcel Common Stock equal to: (i)
the number of shares of Zynaxis Common Stock that the Zynaxis Warrants held by
such shareholder are exercisable to purchase at that time multiplied by (ii) the
Exchange Ratio.
Each of the holders of Zynaxis Preferred Stock further agreed that: (i)
upon execution of the Preferred Stock and Warrant Agreement, all rights that the
holder of Zynaxis Preferred Stock may have had to require Zynaxis to register
securities of Zynaxis for sale under applicable state and federal securities
laws, whether granted pursuant to the Preferred Stock and Warrant Purchase
Agreement or otherwise ("Preferred Stock Holder Registration Rights"), are
suspended pending the Merger, and (ii) upon consummation of the Merger, all such
Preferred Stock Holder Registration Rights will be terminated and such holder of
Zynaxis Preferred Stock will have such registration rights as are provided in
the Agreement. If the Agreement is terminated for any reason, then effective
upon such termination, each holder of Zynaxis Preferred Stock will have such
Preferred Stock Holder Registration Rights as such holder of Zynaxis Preferred
Stock would have had if such Registration Rights had not been suspended.
Note Exchange Agreement. Simultaneously with the execution of the
Agreement, Zynaxis, CytRx, and Vaxcel entered into a Note Exchange Agreement
with Euclid and S.R. One, Ltd. (together the "Noteholders"). The Noteholders
hold Zynaxis Notes on which Zynaxis is the obligor.
The Note Exchange Agreement provides that upon consummation of the Merger,
each Zynaxis Note will be exchanged for the number of shares of Vaxcel Common
Stock equal to the Exchange Ratio multiplied by the quotient (rounded down to
the nearest whole share) obtained by dividing the unpaid principal amount of
such Zynaxis Note, together with unpaid interest thereon accrued through
September 30, 1996, by the Per Share Price, as such term is defined in the
Agreement. At the Closing of the Merger, each holder of a Zynaxis Note will
deliver to Zynaxis the Zynaxis Note, marked "Paid in Full," and Vaxcel will
deliver to each such holder in exchange a certificate representing all the Note
Shares to be issued in exchange for such Zynaxis Note.
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The Note Exchange Agreement also provides that: (i) upon execution of the
Note Exchange Agreement, all rights that a Noteholder may have to require
Zynaxis to register securities of Zynaxis for sale under applicable state and
federal securities laws ("Noteholder Registration Rights") are suspended pending
the consummation of the Merger; and (ii) upon consummation of the Merger, all
such Noteholder Registration Rights will be terminated and such Noteholder will
have such Noteholder Registration Rights as are provided for such Noteholder in
the Agreement. If the Agreement is terminated for any reason, then effective
upon such termination, the Noteholders will have the registration rights as such
Noteholder would have had at such time if such rights had not been suspended.
Technology Development Agreement. Pursuant to a license agreement dated
July 1, 1987 by and between SRI, UAB, and Molecular Engineering Associates,
Ltd., as amended, Zynaxis has an exclusive right and license to the PLG
microencapsulation technology. Zynaxis also owns certain oral vaccine delivery
technology related to compounds which bind to mucosal tissues (the
"mucoadhesive").
Because the Merger will take several months to consummate and the parties
want to ensure the continued development of the PLG and the mucoadhesive
technologies during the time period between execution of the Agreement and the
consummation of the Merger, Vaxcel and ZVT entered into the Technology
Development Agreement. Pursuant to the Technology Development Agreement, ZVT
granted to Vaxcel during the term of the Agreement the exclusive right to
continue to develop the PLG and the mucoadhesive technologies at Vaxcel's own
cost and expense, subject to the rights granted to ALK in a development and
licensing agreement dated September 21, 1995, by and between Zynaxis, ZVT, and
ALK.
Under the Technology Development Agreement, Vaxcel may, at its option and
its sole discretion, elect to undertake the following activities: (i) perform
preclinical experiments using the PLG and the mucoadhesive technologies at
Vaxcel facilities or with other third parties and potential sublicensees; (ii)
negotiate and execute agreements for the PLG and the mucoadhesive technologies,
including, but not limited to, materials transfer agreements, research
agreements, option agreements, sublicense agreements, or other similar
agreements, subject to Zynaxis' right of approval as provided for in the
Technology Development Agreement; (iii) conduct research activities involving
the PLG and the mucoadhesive technologies and receive compensation from
potential sublicensees regarding such research activities; (iv) gain access to
data from current Zynaxis sublicensees for the PLG and the mucoadhesive
technologies; (v) attend scientific conferences and present information to the
conferences on the PLG and the mucoadhesive technologies; (vi) handle all patent
application matters on behalf of Zynaxis as they arise, provided that in the
event Vaxcel elects not to handle a patent application matter, then Zynaxis
shall have the option to handle such matter; and (vii) perform other development
activities that may arise during the term of the Technology Development
Agreement. Vaxcel shall inform and provide updates to Zynaxis on a regular basis
regarding development activities undertaken by Vaxcel.
In the event Vaxcel obtains an agreement for the PLG and the mucoadhesive
technologies as provided for under the Technology Development Agreement, Vaxcel
will retain a maximum of the first $50,000 received from such agreement in
consideration of the services performed under the Technology Development
Agreement. Any amounts received in excess of $50,000 will be transferred to
Zynaxis to be used in satisfaction of Zynaxis' obligations under the Agreement
and the Senior Credit Facility. In the event that the Technology Development
Agreement is terminated due to the termination of the Agreement, then (i) if the
Agreement is terminated under certain circumstances described in the Agreement,
all payments received following termination of the Agreement as a result of
agreements for the PLG and the mucoadhesive technologies entered into by Vaxcel
during the term of the Technology Development Agreement shall be divided such
that 90% of all payments are promptly paid to Vaxcel, or (ii) if the Agreement
is terminated for other reasons, all payments received following termination of
the Technology Development Agreement as a result of agreements for the
technologies entered into by Vaxcel during the term of the Technology
Development Agreement will be paid to Zynaxis.
Shareholder Voting Agreements. Simultaneously with the execution of the
Agreement, CytRx entered into the Shareholder Voting Agreements with certain of
the shareholders of Zynaxis. The following shareholders executed Shareholder
Voting Agreements: Senmed Medical Ventures, Commonwealth Venture Partners I,
L.P., Philadelphia Ventures-Japan I L.P., CIP Capital L.P., Gus G. Casten, and
Alphi Fund L.P.
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Collectively, as of December 6, 1996, these shareholders held approximately
13.2% of the issued and outstanding shares of Zynaxis Common Stock and
approximately 25.1% of the issued and outstanding shares of Zynaxis Preferred
Stock and, as of the Record Date, held % of the issued and outstanding shares
of Zynaxis Common Stock and % of the issued and outstanding shares of Zynaxis
Preferred Stock. Pursuant to the Shareholder Voting Agreements, each of the
shareholders agreed that: (i) at any meeting of shareholders of Zynaxis called
to vote upon any of the matters contemplated by the Agreement (including,
without limitation, the Asset Sales and the Charter Amendment) or at any
adjournment thereof or in any other circumstances upon which a vote, consent or
other approval with respect to any of the matters contemplated by the Agreement
is sought, the shareholder will vote (or cause to be voted) the holder's shares
in favor of each of the matters contemplated by the Agreement; and (ii) at any
meeting of shareholders of Zynaxis or at any adjournment thereof or in any other
circumstances upon which their vote, consent or other approval is sought, the
holder will vote (or cause to be voted) such shareholder's shares against (a)
any merger, consolidation, combination, sale of substantial assets,
reorganization, recapitalization, dissolution, liquidation or winding up of or
by Zynaxis (other than the transactions contemplated by the Agreement), or (b)
any amendment of Zynaxis' Articles of Incorporation, or Bylaws or other proposal
or transaction involving Zynaxis or any of its subsidiaries, which amendment or
other proposal or transaction would in any manner impede, frustrate, prevent or
nullify any of the transactions contemplated by the Agreement (each of the
foregoing in clause (a) or (b) above, a "Competing Transaction").
The Shareholder Voting Agreements are substantially identical except for
two of the Shareholder Voting Agreements. CIP Capital L.P., as of December 6,
1996, held approximately 3.2% of the issued and outstanding shares of Zynaxis
Preferred Stock and, as of the Record Date, held % of the issued and
outstanding shares of Zynaxis Preferred Stock and Alphi Fund L.P. held, as of
December 6, 1996, approximately 2.7% of the issued and outstanding shares of
Zynaxis Common Stock and approximately 10.6% of the issued and outstanding
shares of Zynaxis Preferred Stock and, as of the Record Date, held % of the
issued and outstanding shares of Zynaxis Common Stock and % of the issued and
outstanding shares of Zynaxis Preferred Stock. CIP Capital L.P. and Alphi Fund
L.P. executed Shareholder Voting Agreements that do not restrict the
shareholder's ability to transfer his shares prior to consummation of the
Merger. Each of the other Shareholder Voting Agreements provide that such
shareholder will not transfer (which term includes, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such shareholder's shares or any interest therein; provided, that such
shareholder may transfer any of the shareholder's shares to any other person who
is, or to any family member of a person or charitable institution which prior to
such transfer becomes, a party to the Shareholder Voting Agreements.
Each of the Shareholder Voting Agreements provides that such shareholder
will not (i) grant any proxy, power of attorney or other authorization in or
with respect to such shareholder's shares, except for this Agreement, or (ii)
deposit such shareholder's shares into a voting trust or enter into a voting
agreement or arrangement with respect to such shareholder's shares. Further,
each of the shareholders agreed: (i) to waive any rights of appraisal, or rights
to dissent from the transactions contemplated by the Agreement, that such
shareholder may have (including, without limitation, any rights arising under
Subchapter 25E of the PBCL) and (ii) not to, nor permit any investment banker,
attorney or other adviser or representative of the shareholder to, directly or
indirectly, (a) solicit, initiate or encourage the submission of, any takeover
proposal or (b) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any takeover proposal. "Takeover
proposal" means any proposal for a merger or other business combination
involving Zynaxis or any of its subsidiaries or any proposal or offer to acquire
in any manner, directly or indirectly, an equity interest in any voting
securities of, or a substantial portion of the assets of Zynaxis or any of its
subsidiaries, other than the transactions contemplated by the Agreement and
other than any transfer expressly permitted by the Shareholder Voting
Agreements.
Also pursuant to the Shareholder Voting Agreements, each shareholder
irrevocably granted to, and appointed, CytRx, Jack J. Luchese, Chairman of the
Board, President and Chief Executive Officer of CytRx, and Mark W. Reynolds,
Chief Financial Officer of CytRx, in their respective capacities as officers of
CytRx, and any individual who should succeed to any such office of CytRx, and
each of them individually, the shareholder's proxy and attorney-in-fact (with
full power of substitution), for and in the name, place and stead
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of the shareholder, to vote the shareholder's shares, or grant a consent or
approval in respect of such shares (i) in favor of each of the matters
contemplated by the Agreement, and (ii) against any Competing Transaction.
Finally, each of the Shareholder Voting Agreements, and all rights and
obligations of the parties thereunder, terminates upon the first to occur of (i)
the Closing, or (ii) the date upon which the Agreement is terminated in
accordance with its terms; provided that if an Extension Event, as such term is
defined below, shall have occurred as of or prior to termination of the
Agreement, then, for a period of one year following such termination, certain of
the rights and obligations of the parties under the Shareholder Voting
Agreements will continue in full force and effect and the shareholder agrees not
to transfer any or all of the shareholder's shares in connection with any
Competing Transaction or takeover proposal. Each of the Shareholder Voting
Agreements defines an "Extension Event" to mean any of the following events: (i)
the Special Meeting to approve the matters contemplated by the Agreement is not
held or the requisite approval at the Special Meeting by the holders of Zynaxis
Capital Stock is not obtained, or (ii) any person (other than CytRx or any
subsidiary of CytRx) has made, or disclosed an intention to make, a takeover
proposal or proposal for a Competing Transaction.
Vaxcel Warrants. The Vaxcel Warrants to be issued in exchange for the
Zynaxis Warrants upon consummation of the Merger are governed by the Preferred
Stock and Warrant Agreement and their own terms. The Vaxcel Warrants are
convertible into shares of Vaxcel Common Stock. Pursuant to their terms, the
Vaxcel Warrants are immediately exercisable upon consummation of the Merger and
have a term of one year from the Closing. The Vaxcel Warrants are exercisable at
a price per share equal to: (i) the Per Share Price divided by (ii) the Exchange
Ratio (the "Vaxcel Warrant Price"). Beginning at the 60th day following the
Closing, the Vaxcel Warrants are exercisable at a price per share equal to two
times the Vaxcel Warrant Price in effect immediately prior to such time, subject
to adjustment by the terms of such Vaxcel Warrant in the case of a Merger,
consolidation, or reorganization of Vaxcel.
The Vaxcel Warrants may be exercised during their term in whole or in part
by the surrender of such Vaxcel Warrant, with the purchase agreement attached to
such Vaxcel Warrant properly completed and executed, at the principal office of
Vaxcel and upon payment to it by certified check or bank draft to the order of
Vaxcel for the purchase price for the shares to be purchased upon such exercise.
See "Description of Capital Stock -- Vaxcel Warrants."
CytRx Warrant. The CytRx Warrant, to be issued to CytRx upon consummation
of the Merger pursuant to the Agreement, provides that CytRx is entitled to
purchase from Vaxcel a number of shares of Vaxcel Common Stock equal to: (i) the
amount that the Board of Directors of CytRx reasonably determines is the minimum
amount that must be contributed to the capital of Vaxcel in order for Vaxcel to
satisfy or continue to satisfy quantitative requirements for inclusion or
continued inclusion of the Vaxcel Common Stock on the Nasdaq SmallCap Market
divided by (ii) one-half of the Per Share Price and multiplied by (iii) the
Exchange Ratio.
The per share price for the shares which may be purchased upon the exercise
of the CytRx Warrant (the "Exercise Price") is initially equal to: (i) one-half
of the Per Share Price, divided by (ii) the Exchange Ratio, subject to
adjustment pursuant to the terms of the CytRx Warrant for any mergers,
consolidations or reorganizations of Vaxcel. The CytRx Warrant may be exercised
by giving written notice to Vaxcel and providing Vaxcel with the Exercise Price.
CytRx has the right to purchase shares of Vaxcel Common Stock under the
terms of the CytRx Warrant from the time that the CytRx Board reasonably
determines that Vaxcel's total assets and capital and surplus are insufficient
to satisfy the total assets and capital and surplus requirements for inclusion
of the Vaxcel Common Stock in the Nasdaq SmallCap Market until December 6, 1997.
See "Description of Capital Stock -- CytRx Warrant."
EFFECT OF THE MERGER ON STOCK OPTIONS, WARRANTS, AND PROMISSORY NOTES
The Agreement contemplates that at the Effective Time, each of the Zynaxis
Options granted by Zynaxis under the Zynaxis Stock Plan, as that term is defined
in the Agreement, which are outstanding at the Effective Time, whether or not
exercisable, will be converted into and become rights with respect to Vaxcel
Common
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Stock, and Vaxcel will assume each Zynaxis Option, in accordance with the terms
of the Zynaxis Stock Plan and stock option agreement by which it is evidenced,
except that from and after the Effective Time, (i) Vaxcel and its Compensation
Committee will be substituted for Zynaxis and the committee of the Zynaxis Board
(including, if applicable, the entire Zynaxis Board) administering such Zynaxis
Stock Plan, (ii) each Zynaxis Option assumed by Vaxcel may be exercised solely
for shares of Vaxcel Common Stock (or cash, if so provided under the terms of
the Zynaxis Option), (iii) the number of shares of Vaxcel Common Stock subject
to such Zynaxis Option will be equal to the number of shares of Zynaxis Common
Stock subject to such Zynaxis Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, and (iv) the per share exercise price under
each such Zynaxis Option will be adjusted by dividing the per share exercise
price under each such Zynaxis Option by the Exchange Ratio and rounding up to
the nearest cent. Notwithstanding the provisions of clause (iii) of the
preceding sentence, Vaxcel will not be obligated to issue any fraction of a
share of Vaxcel Common Stock upon exercise of Zynaxis Options and any fraction
of a share of Vaxcel Common Stock that otherwise would be subject to a converted
Zynaxis Option will represent the right to receive a cash payment equal to the
product of such fraction and the difference between the market value of one
share of Vaxcel Common Stock and the per share exercise price of such option. In
addition, notwithstanding any other term in the Agreement, each Zynaxis Option
which is an "incentive stock option" will be adjusted as required by Section 424
of the Code, and the regulations promulgated thereunder, so as not to constitute
a modification, extension, or renewal of the option, within the meaning of
Section 424(h) of the Code.
All restrictions or limitations on transfer with respect to Zynaxis Common
Stock awarded under the Zynaxis Stock Plans or any other plan, program,
contract, or arrangement of any Zynaxis company, to the extent that such
restrictions or limitations will not have already lapsed (whether as a result of
the Merger or otherwise), and except as otherwise expressly provided in such
plan, program, contract, or arrangement, will remain in full force and effect
with respect to shares of Vaxcel Common Stock into which such restricted stock
is converted pursuant to the Agreement.
The Agreement also contemplates that at the Effective Time, each Zynaxis
Warrant which is outstanding at the Effective Time and is held by a party to the
Preferred Stock and Warrant Agreement shall be exchanged for a warrant to
purchase Vaxcel Common Stock in accordance with the terms of the Preferred
Stock and Warrant Agreement.
Each Zynaxis Non-Financing Warrant which is outstanding at the Effective
Time will be converted into and become a Vaxcel Non-Financing Warrant and Vaxcel
will assume each such warrant, in accordance with the terms of the warrant
agreement by which it is evidenced, except that from and after the Effective
Time, (i) each Zynaxis Non-Financing Warrant assumed by Vaxcel may be exercised
solely for shares of Vaxcel Common Stock, (ii) the number of shares of Vaxcel
Common Stock subject to such Vaxcel Non-Financing Warrant will be equal to the
number of shares of Zynaxis Common Stock subject to such Zynaxis Non-Financing
Warrant immediately prior to the Effective Time multiplied by the Exchange
Ratio, and (iii) the per share exercise price under each such Vaxcel
Non-Financing Warrant will be adjusted by dividing the per share exercise price
under each such Zynaxis Non-Financing Warrant by the Exchange Ratio and rounding
up to the nearest cent. Notwithstanding the foregoing, Vaxcel will not be
obligated to issue any fraction of a share of Vaxcel Common Stock upon exercise
of such Vaxcel Non-Financing Warrants and any fraction of a share of Vaxcel
Common Stock that otherwise would be subject to a converted Vaxcel Non-Financing
Warrant will represent the right to receive a cash payment upon exercise of such
converted Vaxcel Non-Financing Warrant equal to the product of such fraction and
the difference between the market value of one share of Vaxcel Common Stock at
the time of exercise of such converted Vaxcel Non-Financing Warrant and the per
share exercise price of such converted Vaxcel Non-Financing Warrant. The market
value of one share of Vaxcel Common Stock at the time of exercise of a converted
Vaxcel Non-Financing Warrant will be the last sale price of a share of Vaxcel
Common Stock on the Nasdaq SmallCap Market (as reported by The Wall Street
Journal or, if not reported thereby, any other authoritative source selected by
Vaxcel) on the last trading day preceding the date of exercise.
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Each Zynaxis Note which is held by a party to the Note Exchange Agreement
will be exchanged for shares of Vaxcel Common Stock in accordance with the terms
of the Note Exchange Agreement, as described above.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Time of the Merger and other transactions contemplated by
the Agreement will occur upon the last to occur of: (i) the filing of the
Articles of Merger in the Department of State of the Commonwealth of
Pennsylvania and (ii) the filing of the Certificate of Merger with the Secretary
of State of the State of Georgia. Unless otherwise agreed upon by Vaxcel and
Zynaxis, and subject to the conditions to the obligations of the parties to
effect the Merger, the parties will use their reasonable efforts to cause the
Effective Time to occur as soon as practical following the last to occur of (i)
the effective date (including the expiration of any applicable waiting period)
of the last consent of any regulatory authority required for the Merger and (ii)
the date on which the shareholders of Zynaxis approve the matters relating to
this Agreement required to be approved by such shareholders by applicable law.
No assurance can be provided that the necessary shareholder approval can be
obtained or that other conditions precedent to the Merger can or will be
satisfied. Zynaxis and Vaxcel anticipate that all conditions to consummation of
the Merger will be satisfied so that the Merger can be consummated during the
first quarter of 1997. However, delays in the consummation of the Merger could
occur.
The Board of Directors of Zynaxis, Vaxcel, or CytRx generally may terminate
the Agreement if the Merger is not consummated by March 31, 1997, unless the
failure to consummate by that date is the result of a breach of the Agreement by
the party seeking termination. See "-- Conditions to Consummation of the Merger"
and "-- Waiver, Amendment, and Termination."
DISTRIBUTION OF VAXCEL STOCK CERTIFICATES AND WARRANTS
Promptly after the Effective Time, Vaxcel will cause American Stock
Transfer and Trust Company, acting in its capacity as Exchange Agent as such
term is defined in the Agreement, to mail a letter of transmittal, together with
instructions for the exchange of the Certificates representing shares of Zynaxis
Capital Stock for certificates representing shares of Vaxcel Common Stock, to
the former shareholders of Zynaxis.
ZYNAXIS SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS.
Upon surrender to the Exchange Agent of Certificates for Zynaxis Capital
Stock, together with a properly completed letter of transmittal, there will be
issued and mailed to each holder of Zynaxis Capital Stock surrendering such
items a certificate or certificates representing the number of shares of Vaxcel
Common Stock to which such holder is entitled, if any, and a check for the
amount to be paid in lieu of any fractional share (without interest), together
with all undelivered dividends or distributions in respect of such shares
(without interest thereon). After the Effective Time, to the extent permitted by
law, Zynaxis shareholders of record as of the Effective Time will be entitled to
vote at any meeting of Vaxcel shareholders the number of whole shares of Vaxcel
Common Stock into which their shares of Zynaxis Capital Stock have been
converted, regardless of whether such shareholders have surrendered their
Zynaxis Capital Stock Certificates. Whenever a dividend or other distribution is
declared by Vaxcel on Vaxcel Common Stock, the record date for which is at or
after the Effective Time, the declaration will include dividends or other
distributions on all shares issuable pursuant to the Agreement, but, beginning
30 days after the Effective Time, no dividend or other distribution payable
after the Effective Time with respect to Vaxcel Common Stock will be paid to the
holder of any unsurrendered Zynaxis Common Stock Certificate until the holder
duly surrenders such certificate. Upon surrender of such Zynaxis Common Stock
Certificate, however, both the Vaxcel Common Stock certificate, together with
all undelivered dividends or other distributions (without interest) and any
undelivered cash payments to be paid in lieu of fractional shares (without
interest), will be delivered and paid with respect to each share represented by
such certificate.
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After the Effective Time, there will be no transfers of shares of Zynaxis
Capital Stock on Zynaxis' stock transfer books. If Certificates representing
shares of Zynaxis Capital Stock are presented for transfer after the Effective
Time, they will be canceled and exchanged for the shares of Vaxcel Common Stock
and a check for the amount due in lieu of fractional shares and undelivered
dividends, if any, deliverable in respect thereof. In no event will the holder
of any surrendered Certificate(s) be entitled to receive interest on any cash to
be issued to such holder, and in no event will Zynaxis, Vaxcel, or the Exchange
Agent be liable to any holder of Zynaxis Capital Stock for any Vaxcel Common
Stock or dividends thereon or cash delivered in good faith to a public official
pursuant to any applicable abandoned property, escheat, or similar law.
Pursuant to the Preferred Stock and Warrant Agreement, at the Closing, each
holder of a Zynaxis Warrant who is a party to the Preferred Stock and Warrant
Agreement will surrender the Zynaxis Warrant and Vaxcel will deliver to each
such holder in exchange a Vaxcel Warrant. At the Closing, each holder of a
Zynaxis Non-Financing Warrant will surrender such warrant and Vaxcel will
deliver to each such holder in exchange a Vaxcel Non-Financing Warrant. At the
Closing, each holder of a Zynaxis Note will deliver to Zynaxis the Zynaxis Note,
marked "Paid in Full," and Vaxcel will deliver to each such holder in exchange a
certificate representing all the Note Shares to be issued in exchange for such
Zynaxis Note.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to various conditions, including the
following: (i) receipt of the approval of the Agreement and the Merger
contemplated thereby, the Asset Sales, and the Charter Amendment by the
shareholders of Zynaxis as required by the PBCL; (ii) receipt of any regulatory
approvals required for consummation of the Merger; (iii) receipt of an opinion
of Alston & Bird in form reasonably satisfactory to the parties, to the effect
that for federal income tax purposes the contributions in exchange for Vaxcel
Common Stock will constitute a transaction described in Section 351 of the Code;
(iv) receipt of approval of the shares of Vaxcel Common Stock issuable pursuant
to the Merger for listing on the Nasdaq SmallCap market, subject to official
notice of issuance; (v) the Registration Statement being declared effective and
all necessary SEC and state approvals relating to the issuance or trading of the
shares of Vaxcel Common Stock issuable pursuant to the Merger shall have been
received; (vi) the accuracy, as of the date of the Agreement and as of the
Effective Time, of the representations and warranties of Zynaxis and Vaxcel as
set forth in the Agreement; (vii) the performance of all agreements and the
compliance with all covenants of Zynaxis and Vaxcel as set forth in the
Agreement; (viii) receipt of all consents required for consummation of the
Merger or for the preventing of any default under any contract or permit which,
if not obtained or made, is reasonably likely to have, individually or in the
aggregate, a material adverse effect; (ix) the absence of any law or order or
any action taken by any court, governmental, or regulatory authority
prohibiting, restricting, or making illegal the consummation of the transaction;
(x) receipt by the parties of legal opinions as to the matters set forth in the
Agreement; (xi) receipt by Vaxcel, from each affiliate of Zynaxis, of the
affiliates letters referred to in the Agreement; (xii) execution of the
Transaction Documents by each of the intended parties and no party can be in
default under the Transaction Documents; (xiii) execution by Zynaxis of an
amendment to its lease that is reasonably satisfactory to CytRx, Vaxcel and
Vaxcel Merger Sub; (xiv) releases from liability under a sublease of which
Zynaxis is a sublessor being obtained by Zynaxis that are satisfactory to CytRx,
Vaxcel, and Vaxcel Merger Sub; (xv) the Zynaxis Board and all relevant
committees thereof must have adopted resolutions that in the judgment of CytRx
and its counsel are sufficient to prevent immediate vesting of outstanding
options of Zynaxis, to approve the treatment of outstanding options of Zynaxis
in the Merger and to find the options to be received "comparable" to currently
outstanding options of Zynaxis within the meaning of the Zynaxis Stock Plan;
(xvi) the holders of shares of Zynaxis Capital Stock having the right to vote no
more than 10% of the votes that could be cast by all holders of Zynaxis Capital
Stock voting together as a single class will have elected to exercise their
statutory dissenters' rights or their statutory objection rights, if any, under
Section 2546 of the PBCL; (xvii) the execution by every holder of shares of
Zynaxis Preferred Stock or of Zynaxis Warrants referenced in the Preferred Stock
and Warrant Agreement must have executed the Preferred Stock and Warrant
Agreement; and (xvii) satisfaction of certain other conditions, including the
receipt of certain legal opinions and various certificates from the officers of
Zynaxis and Vaxcel. See "-- Regulatory Approvals" and "-- Waiver, Amendment, and
Termination."
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No assurance can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the party
permitted to do so. In the event the Merger is not effected on or before March
31, 1997, the Agreement may be terminated and the Merger abandoned by a vote of
a majority of the Board of Directors of either Zynaxis, Vaxcel, or CytRx. See
"-- Waiver, Amendment, and Termination."
REGULATORY APPROVALS
The Merger is not subject to the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder, which provide that certain merger transactions may not be
consummated until required information and material have been furnished to the
Antitrust Division of the Department of Justice and the Federal Trade Commission
and certain waiting periods have expired or been terminated. Other than certain
filings and approvals which may be required under certain state securities or
"blue sky" laws, Vaxcel and Zynaxis are not aware of any federal or state
regulatory requirements that must be complied with or approval obtained in
connection with the Merger.
Should any approval or action be required, it presently is contemplated
that such approval or action would be sought. The Merger may not proceed in the
absence of receipt of the requisite regulatory approvals. There can be no
assurance that any such approvals, if necessary, will not impose conditions or
be restricted in a manner (including requirements relating to the raising of
additional capital or the disposition of assets) which in the reasonable
judgment of the Board of Directors of either Vaxcel or Zynaxis would so
materially adversely impact the economic or business benefits of the
transactions contemplated by the Agreement that, had such condition or
requirement been known, such party would not, in its reasonable judgment, have
entered into the Agreement.
WAIVER, AMENDMENT, AND TERMINATION
To the extent permitted by applicable law, the parties to the Agreement,
with the approval of their respective Boards of Directors, may amend the
Agreement by written agreement at any time before or after approval of the
Agreement by the Zynaxis shareholders; provided, however, that after the Special
Meeting, no amendment may reduce or modify in any material respect the
consideration to be received by holders of Zynaxis Capital Stock without the
requisite approval of the holders of the issued and outstanding shares of
Zynaxis Capital Stock entitled to vote thereon. In addition, prior to or at the
Effective Time, either Zynaxis or Vaxcel, or both, acting through their
respective Boards of Directors or chief executive officers or other authorized
officers may waive any default in the performance of any term of the Agreement
by the other party, may waive or extend the time for the compliance or
fulfillment by the other party of any and all of its obligations under the
Agreement, and may waive any of the conditions precedent to the obligations of
such party under the Agreement, except any condition that, if not satisfied,
would result in the violation of any applicable law or governmental regulation.
No such waiver will be effective unless written and unless executed by a duly
authorized officer of Zynaxis or Vaxcel, as the case may be.
The Agreement may be terminated and the Merger abandoned at any time prior
to the Effective Time (i) by the mutual consent of the Boards of Directors of
Zynaxis and CytRx, (ii) by the Board of Directors of Zynaxis or CytRx (a) in the
event of any material breach of any representation or warranty of the other
party contained in the Agreement which cannot be or has not been cured within 30
days after giving written notice to the breaching party of such inaccuracy and
which breach is reasonably likely, in the opinion of the non-breaching party, to
have, individually or in the aggregate, a Material Adverse Effect, as defined in
the Agreement, on the breaching party (provided that the terminating party is
not then in material breach of any representation, warranty, covenant, or other
agreement contained in the Agreement), (b) in the event of a material breach by
the other party of any covenant or agreement contained in the Agreement which
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching party of such breach (provided that the terminating
party is not then in material breach of any representation, warranty, covenant,
or other agreement contained in the Agreement), (c) in the event (1) any consent
of any regulatory authority required for consummation of the Merger and the
other transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by such authority
is not appealed within the time limit for appeal, or (2) the shareholders of
Zynaxis fail to vote their approval of the matters relating to the Agreement and
the transactions contemplated thereby at the Special Meeting where such
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matters were presented to such shareholders for approval and voted upon
(provided that the terminating party is not then in material breach of any
representation, warranty, covenant, or other agreement contained in the
Agreement), (d) if the Merger is not consummated by March 31, 1997, provided
that the failure to consummate is not due to the breach by the party electing to
terminate, or (e) if any of the conditions precedent to the obligations of such
party to consummate the Merger have not been satisfied, fulfilled, or waived by
the appropriate party by March 31, 1997 (provided that the terminating party is
not then in material breach of any representation, warranty or covenant or other
agreement contained in the Agreement).
If the Merger is terminated as described above, the Agreement will become
void and have no effect, except that certain provisions of the Agreement,
including those relating to the obligations to share certain expenses, maintain
the confidentiality of certain information obtained, and return all documents
obtained from the other party under the Agreement, will survive. In addition,
termination of the Agreement will not relieve any breaching party from liability
for any uncured willful breach of a representation, warranty, covenant, or
agreement giving rise to such termination. See "-- Expenses and Fees."
DISSENTERS' RIGHTS
Pursuant to the PBCL, the owners of shares of Zynaxis Capital Stock at the
Record Date (collectively, the "Eligible Shares") will have dissenters rights in
connection with the Merger under PBCL Subchapter 15D (hereinafter "Subchapter
15D"), a copy of which is attached to this Proxy Statement as Appendix D, and
may object to the Agreement and the Merger contemplated thereby, and the Asset
Sales, and demand in writing that Vaxcel pay the fair value of their Eligible
Shares.
FAILURE BY ANY DISSENTING SHAREHOLDER TO COMPLY WITH ANY PROCEDURE REQUIRED
BY SUBCHAPTER 15D MAY CAUSE A TERMINATION OF SUCH SHAREHOLDER'S DISSENTERS
RIGHTS. THE PARTIES WILL NOT GIVE ANY NOTICE OF THE FOLLOWING REQUIREMENTS OTHER
THAN AS DESCRIBED IN THIS PROXY STATEMENT AND AS REQUIRED BY THE PBCL.
A holder of record of Eligible Shares may assert dissenters rights as to
fewer than all of the Eligible Shares registered in such holder's name only if
the holder dissents with respect to all the Eligible Shares of the same class or
series beneficially owned by any one person and discloses the name and address
of the person or persons on whose behalf the holder dissents. In that event, the
holder's rights shall be determined as if the shares as to which the holder has
dissented and the other shares were registered in the names of different
holders. A beneficial owner of Eligible Shares, who is not also the record
holder of such shares, may assert dissenters rights with respect to shares held
on the owner's behalf and shall be treated as a dissenting shareholder under the
terms of Subchapter 15D if the beneficial owner submits to Zynaxis not later
than the time of filing the Notice of Intention to Dissent (as defined below) a
written consent of the record holder. Such beneficial owner may not dissent with
respect to some but less than all Eligible Shares of the same class or series so
owned.
Holders of Eligible Shares (or beneficial owners thereof as provided above)
who follow the procedures of Subchapter 15D as outlined below will be entitled
to receive from Vaxcel the fair value of their Eligible Shares immediately
before the Effective Time of the Merger, taking into account all relevant
factors but excluding any appreciation or depreciation in anticipation of the
Merger. Holders of Eligible Shares (or beneficial owners thereof) who elect to
exercise their dissenters rights must comply with all of the following
procedures to preserve those rights.
Holders of Eligible Shares (or beneficial owners thereof) who wish to
exercise dissenters rights must file a written notice of intention to demand the
fair value of their Eligible Shares if one or more of the Merger, or the Asset
Sales is effectuated (the "Notice of Intention to Dissent"). Such dissenters
must file the Notice of Intention to Dissent with the Secretary of Zynaxis prior
to the vote for the proposal to which the holder objects, but in no event later
than .M. on 1997, the time and date of the Special Meeting;
they must make no change in their beneficial ownership of Eligible Shares from
the date of such filing until the Effective Time of the Merger; and they must
refrain from voting their Eligible Shares for the adoption of the proposal or
proposals to which the holder objects. Neither a proxy nor a vote against a
proposal will constitute the giving of the Notice of Intention to Dissent.
Shareholders who return signed, unvoted proxy
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cards will be deemed to have voted for the proposals set forth on such cards and
will not be entitled to dissenters rights.
If either the Agreement and the Merger contemplated thereby, or the Asset
Sales is approved by the required vote at the Special Meeting, Vaxcel will mail
a notice (the "Notice of Approval") to all dissenters who filed a Notice of
Intention to Dissent prior to the vote on each of the Agreement, or the Asset
Sales who refrained from voting for the adoption of one or more of the
proposals. Vaxcel expects to mail the Notice of Approval promptly after
effectuation of the Merger. The Notice of Approval will state where and when
(the "Demand Deadline") a demand for payment must be sent and certificates for
Eligible Shares must be deposited in order to obtain payment; it will supply a
form for demanding payment (the "Demand Form") which includes a request for
certification of the date on which the holder, or the person on whose behalf the
holder dissents, acquired beneficial ownership of Eligible Shares; and it will
be accompanied by a copy of Subchapter 15D. Dissenters must ensure that the
Demand Form and their certificates for Eligible Shares are received by Vaxcel on
or before the Demand Deadline. All mailings to Vaxcel are at the risk of the
dissenter. Accordingly, Vaxcel recommends that the Notice of Intention to
Dissent, the Demand Form and the holder's stock certificates be sent by
certified mail.
Any holder (or beneficial owner) of Eligible Shares who fails to file a
Notice of Intention to Dissent, fails to complete and return the Demand Form, or
fails to deposit stock certificates with Vaxcel, each within the time periods
provided above, will lose the holder's (or beneficial owner's) dissenters rights
under Subchapter 15D. A dissenter will retain all rights of a shareholder, or
beneficial owner, as the case may be, until those rights are modified by
effectuation of the Merger.
Upon timely receipt of the completed Demand Form, Vaxcel is required by the
PBCL either to remit to dissenters who have returned the Notice of Intention to
Dissent and the completed Demand Form and have deposited their certificates, the
amount Vaxcel estimates to be the fair value for their shares or to give written
notice that no such remittance will be made. Vaxcel will determine whether to
make such a remittance or to defer payment for such shares until completion of
the necessary appraisal proceedings, after giving due consideration to the
number of shares, if any, with respect to which shareholders have dissented and
any objections that may be raised with respect to the standing of the dissenting
shareholder. The remittance or notice will be accompanied by:
(1) The closing balance sheet and statement of operations of Vaxcel
for the fiscal year ended December 31, 1996, together with the latest
available interim financial statements.
(2) A statement of Vaxcel's estimate of the fair value of the Eligible
Shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of
Subchapter 15D.
If Vaxcel does not remit the amount of its estimate of the fair value of
the Eligible Shares, it will return any certificates that have been deposited,
and may make a notation on any such certificates that a demand for payment in
accordance with Subchapter 15D has been made. If shares carrying such notation
are thereafter transferred, each new certificate issued therefor may bear a
similar notation, together with the name of the original dissenting holder or
owner of such shares. A transferee of such shares will not acquire by such
transfer any rights in Vaxcel other than those which the original dissenter had
after making demand for payment of their fair value.
If Vaxcel gives notice of its estimate of the fair value of the shares as
provided above, without remitting such amount, or remits payment of its estimate
of the fair value of a dissenter's shares and the dissenter believes that the
amount remitted or stated is less than the fair value of such shares, the
dissenter may send to Vaxcel the dissenter's own estimate (the "Holder's
Estimate") of the fair value of the shares as contemplated by PBCL sec. 1578,
which will be deemed a demand for payment of the amount of the deficiency. If a
dissenter does not file a Holder's Estimate within 30 days after the mailing by
Vaxcel of its remittance or notice, the dissenter will be entitled to no more
than the amount stated in the notice or remitted to the dissenter by Vaxcel.
If, within 60 days after the Effective Time of the Merger or after the
timely receipt by Vaxcel of any Holder's Estimate, whichever is later, any
demands for payment remain unsettled, Vaxcel may file in the
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Court of Common Pleas of Chester County an application for relief requesting
that the fair value of the shares be determined by the court. There is no
assurance that Vaxcel will file such an application. All dissenters, wherever
residing, whose demands have not been settled will be made parties to any such
appraisal proceeding. The court may appoint an appraiser to receive evidence and
recommend a decision on the issue of fair value. Each dissenter who is made a
party will be entitled to recover the amount by which the fair value of the
dissenter's shares is found to exceed the amount, if any, previously remitted,
plus interest. If Vaxcel fails to file an application for relief, any dissenter
who has made a demand and who has not already settled the dissenter's claim
against Vaxcel may do so in the name of Vaxcel at any time within 30 days after
the expiration of the 60-day period. If a dissenter does not file an application
within the 30-day period, each dissenter entitled to file an application shall
be paid Vaxcel's estimate of the fair value of the shares and no more, and may
bring an action to recover any amount not previously remitted.
The costs and expenses of such court proceedings, including the reasonable
compensation and expenses of the appraiser appointed by the court, will be
determined by the court and assessed against Vaxcel, except that any part of the
costs and expenses may be apportioned and assessed as the court deems
appropriate against all or some of the dissenters who are parties and whose
action in demanding supplemental payment the court finds to be dilatory,
obdurate, arbitrary, vexatious, or in bad faith. Fees and expenses of counsel
and of experts for the respective parties may be assessed as the court deems
appropriate against Vaxcel, and in favor of any or all dissenters, if Vaxcel
fails to comply substantially with the requirements of Subchapter 15D. Such fees
and expenses may be assessed against either Vaxcel or a dissenter, if the court
finds that the party against whom the fees and expenses are assessed acted in
bad faith or in a dilatory manner. If the court finds that the services of
counsel for any dissenter were of substantial benefit to other dissenters
similarly situated and should not be assessed against Vaxcel, it may award such
counsel reasonable fees to be paid out of the amounts awarded to the dissenters
who were benefited.
Under the PBCL, a shareholder of Zynaxis has no right to obtain, in the
absence of fraud or fundamental unfairness, an injunction against the Merger or
Asset Sales, nor any right to valuation and payment of the fair value of the
holder's shares because of the Merger or Asset Sales, except to the extent
provided by the dissenters rights provisions of Subchapter 15D. The PBCL also
provides that absent fraud or fundamental unfairness, the rights and remedies
provided by Subchapter 15D are exclusive.
The foregoing description of the rights of dissenters under Subchapter 15D
should be read in conjunction with Appendix D to this Proxy Statement, and is
qualified in its entirety by the provisions of Subchapter 15D.
OBJECTION RIGHTS UNDER SUBCHAPTER 25E OF THE PBCL
The adoption of the Charter Amendment amending the Articles of
Incorporation of Zynaxis and making PBCL Subchapter 25E (hereinafter "Subchapter
25E") inapplicable to the Merger is a condition to the consummation of the
Merger. If the Charter Amendment is not approved by holders of Zynaxis Capital
Stock and Vaxcel elects to proceed with the Merger, each of the holders of
Eligible Shares pursuant to Subchapter 25E of the PBCL who objects to the Merger
and complies with certain procedural requirements will be entitled to receive
cash from CytRx for each of such shareholder's Eligible Shares in an amount
equal to the "fair value" of each Eligible Share as of the date the control
transaction occurs. Although Subchapter 25E of the PBCL provides for a judicial
appraisal procedure, "fair value" is defined to be not less than the highest
price per share paid by the acquiror in a control transaction at any time during
the 90-day period ending on and including the date of the control transaction,
plus to the extent not reflected in such price paid, an increment representing
any value, including, without limitation, any proportion of any value payable
for control of such corporation. A control transaction is the acquisition by a
person (or group of persons acting in concert) of voting power over voting
shares of a registered corporation (of which Zynaxis is one) which would entitle
the holders of such shares to cast 20% or more of the votes that all
shareholders would be entitled to cast in an election of directors of such
corporation.
FAILURE BY ANY OBJECTING SHAREHOLDER TO COMPLY WITH ANY PROCEDURE REQUIRED
BY SUBCHAPTER 25E MAY CAUSE A TERMINATION OF SUCH SHAREHOLDER'S RIGHT TO RECEIVE
PAYMENT THEREUNDER. THE PARTIES WILL NOT GIVE
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ANY NOTICE OF THE FOLLOWING REQUIREMENTS OTHER THAN AS DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS AND AS REQUIRED BY THE PBCL.
Pursuant to Subchapter 25E, prompt notice (the "Notice") that a control
transaction has occurred is required to be given to each holder of Eligible
Shares and the Court of Common Pleas of Chester County (the "Court"),
accompanied by a petition (the "Petition") to the Court requesting that the fair
value of the Eligible Shares be determined pursuant to Subchapter 25E if the
Court receives certificates from holders of Eligible Shares or an equivalent
request for transfer of uncertificated securities. The Notice must include a
copy of Subchapter 25E and inform all holders of Eligible Shares that they are
entitled to demand fair value for their shares. It must also set forth the
minimum value a holder of Eligible Shares can receive under Subchapter 25E and
inform the holders of Eligible Shares (who believe the fair value to be higher
than the minimum value described above) of the appraisal procedure for
determining fair value provided for under Subchapter 25E.
In the event Zynaxis shareholders do not approve the Charter Amendment and
Vaxcel elects to proceed with the Merger, any holder of Eligible Shares may,
prior to or within a reasonable time after the Notice is given, make written
demand (the "Objector's Demand") on CytRx for payment of cash for each Eligible
Share in an amount equal to the fair value thereof as of the date on which the
control transaction occurs, taking into account all relevant factors. Such
Objector's Demand must state the number and class or series, if any, of Eligible
Shares owned with respect to which the Objectors Demand is made. CytRx will be
required to pay this amount to the holders of Eligible Shares pursuant to the
procedures in Subchapter 25E. Nothing in Subchapter 25E precludes CytRx from
offering to purchase Eligible Shares at a price other than that provided in
Subchapter 25E, and nothing therein precludes any holder of Eligible Shares from
agreeing to sell such shares at that or any other price to any person. ALL
MAILINGS TO CYTRX ARE AT THE RISK OF THE OBJECTOR. ACCORDINGLY, CYTRX AND VAXCEL
RECOMMEND THAT THE OBJECTORS DEMAND AND ANY OTHER DOCUMENTS BE SENT BY CERTIFIED
MAIL.
CytRx, at its option, may supply with the Notice a form for the holder of
Eligible Shares to demand payment (the "Alternative Demand Form") of an amount
equal to the highest price paid per Eligible Share by CytRx within the 90-day
period ending on and including the date of the control transaction (the "Partial
Payment") directly from CytRx without utilizing the Court-appointed appraisal
procedure set forth in Subchapter 25E. The Alternative Demand Form requires the
holder of Eligible Shares to state the number and class or series, if any, of
Eligible Shares, where the payment demand must be sent and the procedures to be
followed.
If, within 45 days (or such other period required by applicable law) after
the date of the Notice, or, if such Notice was not provided prior to the date of
the Objectors Demand by the holder of Eligible Shares, then within 45 days (or
such other time required by applicable law) of the date of such Objectors
Demand, CytRx and the holder of Eligible Shares are unable to agree on the fair
value of the Eligible Shares or on a binding procedure to determine the fair
value of the Eligible Shares, then each holder of Eligible Shares who is unable
to agree on both the fair value and on such a procedure with CytRx and who so
desires to obtain the rights and remedies provided in Subchapter 25E must, no
later than 30 days after the expiration of the applicable 45-day or other
period, surrender to the Court certificates representing any of the Eligible
Shares that are certificated shares, duly endorsed for transfer to CytRx, or
cause any uncertificated share to be transferred to the Court as escrow agent
under Subchapter 25E. A notice must also be included which states that the
certificates or uncertificated shares are being surrendered or transferred, as
the case may be, in connection with the Petition or, if no Petition has
theretofore been filed, the holder of Eligible Shares may file a petition within
the 30-day period in the Court, requesting that the fair value of the Eligible
Shares be determined.
Any holder of Eligible Shares who does not give notice and surrender any
certificates or cause uncertificated shares to be transferred within such time
period will have no further right to receive, with respect to shares the
certificates of which were not so surrendered or the uncertificated shares which
were not so transferred, payment under Subchapter 25E from CytRx with respect to
the transaction giving rise to the rights of the holder of Eligible Shares under
Subchapter 25E.
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The Court shall hold the certificates and uncertificated shares in escrow
for, and following the expiration of the time period during which certificates
may be surrendered and uncertificated shares transferred, shall promptly provide
notice to CytRx of the number of Eligible Shares surrendered or transferred.
CytRx will make the Partial Payment for the Eligible Shares so surrendered
or transferred to the Court, within ten business days of receipt of the notice
from the Court, at a per-share price equal to the Partial Payment amount. The
Court will then make payment as soon as practicable, but in any event within ten
business days, to the holders of Eligible Shares who surrendered or transferred
their shares to the Court.
Any amount owed including interest, as determined pursuant to the appraisal
procedures shall be payable by CytRx after it is determined and concurrently
with the delivery or transfer to CytRx by the Court of the certificates
representing the Eligible Shares surrendered or uncertificated shares
transferred to the Court. The Court shall promptly make payment to the holder of
Eligible Shares.
Upon receipt of any Eligible Share certificate surrendered or
uncertificated share transferred under Subchapter 25E, the Court will, as soon
as practicable, but in any event within 30 days, appoint an appraiser with
experience in appraising share values of companies of like nature to Zynaxis to
determine the fair value of the Eligible Shares. The appraiser shall determine
the fair value of the Eligible Shares subject to its appraisal and the
appropriate market rate of interest owned by CytRx to the holder of the Eligible
Shares. The determination of any appraiser will be final and binding on both
CytRx and all holders of Eligible Shares who so surrendered their share
certificates or transferred their shares to the Court, except that the
determination of the appraiser is subject to judicial review.
Holders of Eligible Shares who surrender their shares to the Court pursuant
to Subchapter 25E will retain the right to vote their shares and receive
dividends or other distributions thereon until the Court receives payment in
full for each of the Eligible Shares so surrendered or transferred of the
Partial Payment amount. Thereafter, CytRx will be entitled to vote such shares
and receive dividends or other distributions thereon. The fair value (as
determined by the appraiser) of any dividends or other distributions so received
by the holders of Eligible Shares will be subtracted from any amount owing to
such holders under Subchapter 25E. The costs and expenses of any appraiser or
other agents appointed by the Court shall be assessed against CytRx and the
costs and expenses of any other procedure to determine fair value shall be paid
as agreed to by CytRx and the holders of Eligible Shares.
Zynaxis is required to comply with requests for information, which may be
submitted pursuant to procedures maintaining the confidentiality of the
information, made by the Court or the appraiser selected by the Court. If any of
the Eligible Shares are not represented by certificates, the transfer, escrow or
retransfer of those shares contemplated by Subchapter 25E must be registered by
Zynaxis, which must give the written notice to the transferring holder, CytRx
and the Court.
Any amount agreed upon or determined pursuant to the procedure set forth in
Subchapter 25E will be payable by CytRx after it is agreed upon or determined
and concurrently with the delivery of any certificate or certificates
representing such Eligible Shares or the transfer of any uncertificated shares
to CytRx by the holder. Upon full payment by CytRx to the holder of Eligible
Shares, or to the Court, as appropriate, the holder will cease to have any
interest in the Eligible Shares.
The foregoing description of objection rights under Subchapter 25E should
be read in conjunction with Appendix E to this Proxy Statement, and is qualified
in its entirety by the provisions of Subchapter 25E.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Agreement, Zynaxis has agreed that unless the prior written
consent of Vaxcel has been obtained, and except as otherwise expressly
contemplated in the Agreement, the Transaction Documents, or as previously
disclosed by Zynaxis to Vaxcel, Zynaxis will (i) operate its business only in
the usual, regular, and ordinary course, (ii) preserve intact its business
organization and assets and maintain its rights and franchises, and (iii) take
no action which would (a) materially adversely affect the ability of any party
to obtain any consents required for the transactions contemplated by the
Agreement without imposition of a condition or restriction of the type referred
to in the Agreement or (b) materially adversely affect the ability of any party
to perform its covenants and agreements under the Agreement.
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In addition, Zynaxis has agreed that, prior to the earlier of the Effective
Time or termination of the Agreement, Zynaxis will not, except with the prior
written consent of Vaxcel or as expressly contemplated or permitted by the
Agreement, the Transaction Documents, or as previously disclosed by Zynaxis to
Vaxcel, agree or commit to do, any of the following: (i) amend the Articles of
Incorporation, Bylaws, or other governing instruments of any Zynaxis company;
(ii) incur any additional debt obligation or other obligation for borrowed money
except in the ordinary course of business of Zynaxis and its subsidiaries
consistent with past practices or impose, or suffer the imposition, on any asset
of any Zynaxis company any lien or permit any such lien to exist; (iii)
repurchase, redeem, or otherwise acquire or exchange (other than exchanges in
the ordinary course under employee benefit plans or in their capacity as
transfer agent), directly or indirectly, any shares, or any securities
convertible into any shares, of the capital stock of any Zynaxis company, or
declare or pay any dividend or make any other distribution in respect of any
Zynaxis Capital Stock; (iv) except pursuant to the conversion of Zynaxis
Preferred Stock or pursuant to the exercise of stock options or warrants
previously disclosed by Zynaxis to Vaxcel, issue, sell, pledge, encumber,
authorize the issuance of, enter into any contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of Zynaxis Capital Stock, or any other
capital stock of any Zynaxis company, or any stock appreciation rights, or any
option, warrant, conversion, or other right to acquire any such stock, or any
security convertible into any such stock; (v) adjust, split, combine, or
reclassify any capital stock of any Zynaxis company or issue or authorize the
issuance of any other securities in respect of or in substitution for shares of
Zynaxis Capital Stock or sell, lease, mortgage, or otherwise dispose of or
otherwise encumber any shares of capital stock of any Zynaxis company (unless
any such shares of stock are sold or otherwise transferred to another Zynaxis
company) or any assets other than in the ordinary course of business for
reasonable and adequate consideration; (vi) except for purchases of U.S.
Treasury securities or U.S. government agency securities, which in either case
have maturities of three years or less, purchase any securities or make any
material investment, either by purchase of stock or securities, contributions to
capital, asset transfers, or purchase of any assets, in any person other than a
wholly owned Zynaxis subsidiary, or otherwise acquire direct or indirect control
over any person, other than in connection with foreclosures in the ordinary
course of business; (vii) grant any increase in compensation or benefits to the
employees or officers of any Zynaxis company except in the ordinary course of
business or as previously disclosed to Vaxcel by Zynaxis or as required by law;
pay any severance or termination or any bonus other than pursuant to written
policies or written contracts in effect on December 6, 1996, and previously
disclosed to Vaxcel by Zynaxis; enter into or amend any severance agreements
with officers of any Zynaxis company; or grant any increase in fees or other
increases in compensation or other benefits to directors of any Zynaxis company
except as previously disclosed to Vaxcel by Zynaxis; (viii) enter into or amend
any employment contract between any Zynaxis company and any person (unless such
amendment is required by law) that the Zynaxis company does not have the
unconditional right to terminate without liability (other than liability for
services already rendered), at any time on or after the Effective Time; (ix)
adopt any new employee benefit plan of any Zynaxis company or make any material
change in or to any existing employee benefit plans of any Zynaxis company other
than any such change that is required by law or that, in the opinion of counsel,
is necessary or advisable to maintain the tax qualified status of any such plan;
(x) make any significant change in any tax or accounting methods or systems of
internal accounting controls, except as may be appropriate to conform to changes
in tax laws or regulatory accounting requirements or generally accepted
accounting principles; (xi) commence or settle any litigation other than in
accordance with past practice or settle any litigation involving any liability
of any Zynaxis company for material money damages or restrictions upon the
operations of any Zynaxis company; or (xii) enter into, modify, amend or
terminate any material contract or waive, release, compromise or assign any
material rights or claims.
The Agreement also provides that from the date of the Agreement until the
earlier of the Effective Time or the termination of the Agreement, unless the
prior written consent of Zynaxis is obtained, Vaxcel covenants and agrees that
it will (i) continue to conduct its business and the business of its
subsidiaries in a manner designed in its reasonable judgment, to enhance the
long-term value of the Vaxcel Common Stock and the business prospects of the
Vaxcel companies and to the extent consistent therewith, use all reasonable
efforts to preserve intact the Vaxcel companies' core businesses and goodwill
with their respective employees and the communities they serve, and (ii) take no
action which would (a) materially adversely affect the ability of any
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party to obtain any consents required for the transactions contemplated by the
Agreement without imposition of a condition or restriction of the type referred
to in the Agreement or (b) materially adversely affect the ability of any party
to perform its covenants and agreements under the Agreement; provided, that any
Vaxcel company may acquire any other company or discontinue or dispose of any of
its assets or business if such action is, in the reasonable judgment of Vaxcel,
desirable in the conduct of the business of Vaxcel and its subsidiaries,
provided that such actions may not materially delay the Effective Time or
materially hinder consummation of the Merger. Vaxcel further agrees that it will
not, without the prior written consent of Zynaxis, which consent may not be
unreasonably withheld, amend the Certificate of Incorporation or Bylaws of
Vaxcel or, except as expressly contemplated by the Agreement or the Transaction
Documents, in any manner adverse to the holders of Zynaxis Capital Stock as
compared to rights of holders of Vaxcel Common Stock generally as of December 6,
1996.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Consummation of the Merger will not alter the present management of Vaxcel
or the Vaxcel Board. Information concerning the management of Vaxcel is included
herein. See "Business of Vaxcel -- Directors and Executive Officers." For
additional information regarding the interests of certain persons in the Merger,
see "-- Interests of Certain Persons in the Merger."
Vaxcel will be the parent of Zynaxis as a result of the Merger and shall
continue to be governed by the laws of the State of Delaware and operate in
accordance with its Certificate of Incorporation and Bylaws as in effect on the
date of the Agreement until otherwise amended or repealed after the Effective
Time.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
No director or executive officer of CytRx or Vaxcel had or will have a
business relationship with Zynaxis prior to the Effective Time. No director or
executive officer of Zynaxis had or will have a business relationship with CytRx
or Vaxcel prior to the Effective Time. In considering the recommendation of the
Zynaxis Board with respect to the Merger, however, the Zynaxis shareholders
should be aware that certain directors and executive officers of Zynaxis have an
interest in the consummation of the Merger. Stephen K. Reidy, a member of the
Zynaxis Board, is a general partner of the general partner of Euclid, which is a
holder of Zynaxis Common Stock, Zynaxis Preferred Stock, Zynaxis Warrants and a
Zynaxis Note. Lyle A. Hohnke, a member of the Zynaxis Board, is a member of a
limited liability company which is a general partner of Javelin Capital Fund,
L.P. ("Javelin"), which is a holder of Zynaxis Preferred Stock and Zynaxis
Warrants. John F. Chappell, a member of the Zynaxis Board, is the President and
sole shareholder of Plexus Ventures, Inc. ("Plexus"), which is a holder of
Zynaxis Common Stock, Zynaxis Preferred Stock, Zynaxis Warrants and a Zynaxis
Note. Donald E. Morel, Jr., a member of the Zynaxis Board, is a vice president
of The West Company ("West"), which is a holder of Zynaxis Preferred Stock and
Zynaxis Options. Additionally, each of Messrs. Reidy, Hohnke, Chappell and Morel
individually owns Zynaxis Options and Dennis P. Schafer, a member of the Zynaxis
Board, is a holder of Zynaxis Common Stock and Zynaxis Options. Martyn D.
Greenacre, the President and Chief Executive Officer of Zynaxis and a member of
the Zynaxis Board, is a holder of Zynaxis Options. Michael A. Christie, an
executive officer of Zynaxis, is a holder of Zynaxis Options. Upon the
consummation of the Merger, (i) Euclid, Javelin, Plexus, West and Mr. Schafer
will receive Vaxcel Common Stock in exchange for their shares of Zynaxis Common
Stock and Zynaxis Preferred Stock, if any, (ii) Euclid, Javelin, Plexus and West
will receive Vaxcel Warrants in exchange for their Zynaxis Warrants; (iii)
Euclid will receive shares of Vaxcel Common Stock in exchange for the surrender
and cancellation of its Zynaxis Note; (iv) Plexus will be repaid the full amount
of its Zynaxis Note, with unpaid interest accrued thereon (presently estimated
to be $107,409); and (v) each of Messrs. Reidy, Hohnke, Chappell, Morel,
Schafer, Greenacre and Christie will receive options to purchase Vaxcel Common
Stock in exchange for their Zynaxis Options. See "-- Selling Shareholders of
Zynaxis." Messrs. Greenacre and Christie hold 595,000 and 16,000 Zynaxis
Options, respectively, which will be exchanged in the Merger for approximately
56,387 and 1,516 options to purchase Vaxcel Common Stock, respectively.
Mr. Greenacre has entered into an amendment to his employment agreement
which provides that (a) Mr. Greenacre shall continue to serve as the President
and Chief Executive Officer of Zynaxis until the first to occur of (i)
termination of his employment under the terms of his employment agreement or
(ii) the
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Closing of the Merger; (b) compensation payable to Mr. Greenacre under the
employment agreement and deferred through the Closing shall be paid to Mr.
Greenacre in a lump sum at the Closing (currently estimated to be $37,093); (c)
severance of $29,960 shall be paid to Mr. Greenacre at the Closing; and (d)
performance bonuses up to an aggregate amount of $55,000 shall be paid to Mr.
Greenacre at the Closing upon the occurrence of certain events, including, among
others, (i) if Zynaxis operates within the operating budget agreed to by Zynaxis
and CytRx over a specified period, (ii) certain assets sales for specified gross
proceeds, (iii) Zynaxis subleases certain leased space at its corporate
headquarters under specified terms, and (iv) Phanos exercises its purchase
option for the Zyn-Linker(R) technology. Additionally, Zynaxis has agreed to pay
Mr. Christie a bonus of $25,000 on the closing of the sale of the Cauldron
division if a definitive agreement of sale is executed before the Closing of the
Merger and Mr. Christie continues to be employed by Zynaxis at that time, and
after the Closing, provided Mr. Christie remains employed by Zynaxis or Vaxcel,
a bonus of $10,000 on the closing of the sale of the Cauldron division.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A SUMMARY OF CERTAIN ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO ZYNAXIS SHAREHOLDERS. THIS SUMMARY IS BASED ON THE
FEDERAL INCOME TAX LAWS AS NOW IN EFFECT AND AS CURRENTLY INTERPRETED; IT DOES
NOT TAKE INTO ACCOUNT POSSIBLE CHANGES IN SUCH LAWS OR INTERPRETATIONS,
INCLUDING AMENDMENTS TO APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN
JUDICIAL OR ADMINISTRATIVE RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT.
THIS SUMMARY DOES NOT PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY
PERSON. IN PARTICULAR, AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT
ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO ZYNAXIS
SHAREHOLDERS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES OR STATUS (FOR EXAMPLE,
AS FOREIGN PERSONS, TAX-EXEMPT ENTITIES, DEALERS IN SECURITIES, INSURANCE
COMPANIES, AND CORPORATIONS, AMONG OTHERS). NOR DOES THIS SUMMARY ADDRESS: (I)
ANY CONSEQUENCES OF THE MERGER UNDER ANY STATE, LOCAL, ESTATE, OR FOREIGN TAX
LAWS, OR (II) THE TAXATION OF THE EXCHANGE OF WARRANTS FOR ZYNAXIS COMMON STOCK
FOR WARRANTS FOR VAXCEL COMMON STOCK. ZYNAXIS SHAREHOLDERS, THEREFORE, ARE URGED
TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF
THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICATION AND
EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL, AND OTHER TAX LAWS, AND THE
IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
For federal income tax purposes, the Merger is intended to constitute a
transaction described in Section 351 of the Code, in which case the following
tax consequences will generally result (subject to the limitations and
qualifications referred to herein):
(a) Generally, no gain or loss will be recognized to CytRx, the
Zynaxis shareholders, or the Noteholders upon the transfer of property to
Vaxcel solely in exchange for Vaxcel Common Stock.
(b) No gain or loss will be recognized to Vaxcel upon its receipt of
property solely in exchange for Vaxcel Common Stock.
(c) The basis of the Vaxcel Common Stock to be received by each
transferor will be the same as the basis of the property exchanged
therefor, plus any gain recognized by such transferor on the exchange and
less the basis allocated to any fractional share of Vaxcel Common Stock
settled by cash payment.
(d) The basis to Vaxcel of the property to be received in the exchange
will be the same as the basis of such property in the hands of the
transferor immediately prior to the exchange, increased by the amount of
gain recognized by such transferor as a result of the exchange.
(e) The holding period of the Vaxcel Common Stock to be received by
each transferor will include the holding period of the property exchanged
therefor, provided that such property is held as a capital asset on the
date of the exchange or as property described in Section 1231.
(f) The holding period of the property to be received by Vaxcel in the
exchange will, in each instance, include the period during which such
property was held by the transferor.
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(g) The payment of cash in lieu of fractional shares of Vaxcel Common
Stock will be treated as if the fractional shares were issued as part of
the exchange and then redeemed by Vaxcel. These cash payments will be
treated as having been received as distributions in full payment in
exchange for the fractional shares of Vaxcel Common Stock as provided in
Section 302(a). Generally, any gain or loss recognized upon such exchange
will be capital gain or loss, provided the fractional share would
constitute a capital asset in the hands of the exchanging shareholder.
(h) Where solely cash is received by a transferor in exchange for its
shares of Zynaxis Capital Stock pursuant to the exercise of dissenters'
rights, such cash will be treated as having been received in redemption of
its shares of Zynaxis Capital Stock, subject to the provisions and
limitations of Section 302 of the Code.
A federal income tax ruling with respect to this transaction was not
requested from the Internal Revenue Service ("IRS"). Instead, Alston & Bird,
counsel to Vaxcel, will render an opinion to Zynaxis and Vaxcel concerning
certain federal income tax consequences of the proposed Merger under federal
income tax law. It is such firm's opinion that, based upon the assumption the
Merger is consummated pursuant to Delaware law and that the proposed
transactions are consummated in accordance with the terms of the Agreement and
in conformity with the representations made by the management of Zynaxis and
Vaxcel, the transaction will be described in Section 351 of the Code (the "Tax
Opinion"). The Tax Opinion does not address any state, local, or other tax
consequences of the Merger. The Tax Opinion does not bind the IRS nor preclude
the IRS from adopting a contrary position. In addition, the Tax Opinion will be
subject to certain assumptions and qualifications and will be based on the truth
and accuracy of certain representations made by the management of Zynaxis and
Vaxcel. FINALLY, THE TAX OPINION DOES NOT ADDRESS THE TAXATION OF THE EXCHANGE
OF WARRANTS FOR ZYNAXIS COMMON STOCK FOR WARRANTS FOR VAXCEL COMMON STOCK.
A successful IRS challenge to the status of the transaction as a
transaction described in Section 351 of the Code would result in a Zynaxis
shareholder recognizing gain or loss with respect to each share of Zynaxis
Capital Stock surrendered equal to the difference between the shareholder's
basis in such share and the fair market value, as of the Effective Time of the
Merger, of the Vaxcel Common Stock received in exchange therefor. In such event,
a Zynaxis shareholder's aggregate basis in the Vaxcel Common Stock received
would equal its fair market value and his or her holding period for such stock
would begin the day after the Merger.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a purchase of
Zynaxis by Vaxcel as that term is used pursuant to generally accepted accounting
principles, for accounting and financial reporting purposes. Under the purchase
method of accounting, the assets and liabilities of Zynaxis as of the Effective
Time will be recorded at their estimated respective fair values and added to
those of Vaxcel. Financial statements of Vaxcel issued after the Effective Time
will reflect such values and will not be restated retroactively to include the
historical financial position or results of operations of Zynaxis.
EXPENSES AND FEES
The Agreement provides, in general, that each of the parties will bear and
pay all direct costs and expenses incurred by it or on its behalf in connection
with the transactions contemplated by the Agreement, including filing,
registration and application fees, printing fees, and fees and expenses of its
own financial or other consultants, investment bankers, accountants, and
counsel, except that: (i) each of the parties will bear and pay one-half of the
filing fees payable in connection with the Proxy Statement and printing costs
incurred in connection with the printing of the Proxy Statement; and (ii)
Zynaxis will pay all fees and expenses of counsel to CytRx and Vaxcel. However,
if the Agreement is terminated for any reason other than as set forth below,
then the amount of fees and expenses of Alston & Bird, counsel to CytRx and
Vaxcel, paid by Zynaxis through the date of termination will be deducted from
the balance due under the Senior Credit Facility.
Notwithstanding the foregoing: (a) if the Agreement is terminated by CytRx
based on the failure of Zynaxis' shareholders to approve the Agreement; (b) if
the Merger is not consummated as a result of the failure, due to intentional
action or inaction on the part of Zynaxis or any of its officers, directors,
employees, or agents of Zynaxis to satisfy any of the conditions to the
obligations of Vaxcel, CytRx and Vaxcel Merger
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Sub to consummation of the transactions contemplated by the Agreement; or (c) if
the Agreement is terminated for any reason after the Zynaxis Board supplies
information to another potential acquiror or fails to recommend the approval of
the Agreement to its shareholders, then Zynaxis will be obligated to promptly
pay CytRx all the out-of-pocket costs and expenses of CytRx and its
subsidiaries, including reasonable costs of counsel, investment bankers,
actuaries, and accountants, incurred in connection with the transactions
contemplated by the Agreement.
In addition, if, after the date of the Agreement and within 12 months
following (a) any termination of the Agreement by CytRx on the basis of the
failure of Zynaxis to satisfy certain conditions, or by either party based on
the failure of the shareholders of Zynaxis to approve the Agreement and the
Merger contemplated thereby, or (b) failure to consummate the Merger by reason
of any failure of Zynaxis to satisfy certain conditions, including approval of
the Agreement by the shareholders of Zynaxis, any third party shall acquire,
merge with, combine with, purchase a substantial part of the assets of, or
engage in any other business combination with, or purchase any equity securities
involving an acquisition of 20% or more of the voting stock of Zynaxis, or enter
into any binding agreement to do any of the foregoing (collectively, a "Business
Combination"), such third party that is a party to the Business Combination must
pay to CytRx, prior to the earlier of consummation of the Business Combination
or execution of any letter of intent or definitive agreement with Zynaxis
relating to such Business Combination, an amount in cash equal to the sum of:
(x) the certain direct costs and expenses or portion incurred by or on behalf of
CytRx or Vaxcel in connection with the transactions contemplated by the
Agreement, and (y) 5% of the aggregate fair market value of the consideration
received by the shareholders of Zynaxis in such Business Combination, less (z)
any certain other expense amounts previously paid by Zynaxis to CytRx or Vaxcel
pursuant to the Agreement which would represent additional compensation for
CytRx's loss as the result of the transactions contemplated by the Agreement not
being consummated. In the event such third party shall refuse to pay such
amounts within ten days of demand therefor by CytRx, the amounts shall be an
obligation of Zynaxis and shall be paid by Zynaxis promptly upon notice to
Zynaxis by CytRx.
RESALES OF VAXCEL COMMON STOCK
The shares of Vaxcel Common Stock issuable in connection with the Merger
have been registered under the Securities Act. Accordingly, there will be no
federal securities law restrictions upon the resale or transfer of such shares
by Zynaxis shareholders except for those shareholders who are deemed
"affiliates" of Zynaxis, as that term is defined in Rule 144 and Rule 145
adopted under the Securities Act. Under the Agreement, Zynaxis has agreed to
keep the Registration Statement effective to cover the resale by such
affiliates. The Vaxcel Warrants and the Vaxcel Non-Financing Warrants and the
shares of Vaxcel Common Stock issuable pursuant to such warrants have not been
registered under the Securities Act, by reason of their issuance in a
transaction exempt from the registration requirements of the Securities Act
pursuant to the exemption provided in Section 4(2) thereof, and will not be
registered under state securities laws by reason of their issuance in a
transaction exempt from such registration requirements. Consequently, the Vaxcel
Warrants and the Vaxcel Non-Financing Warrants and the shares of Vaxcel Common
Stock issuable pursuant to such warrants may not be sold, transferred or
otherwise disposed of unless registered under the Securities Act and applicable
state securities laws or exempted from such registration. However, under the
Agreement, Vaxcel has agreed to keep the Registration Statement effective to
cover the resale of shares issued pursuant to the Vaxcel Warrants and the Vaxcel
Non-Financing Warrants. See "Selling Shareholders of Zynaxis" and "Plan of
Distribution."
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EFFECT OF THE MERGER ON RIGHTS OF SHAREHOLDERS
As a result of the Merger, holders of Zynaxis Capital Stock will be
exchanging their shares of a Pennsylvania corporation governed by the PBCL and
Zynaxis' Articles of Incorporation (the "Articles") and Bylaws, for shares of
Vaxcel, a Delaware corporation governed by the DGCL and Vaxcel's Certificate of
Incorporation and Bylaws. Certain significant differences exist between the
rights of Zynaxis shareholders and those of Vaxcel shareholders. The differences
deemed material by Zynaxis and Vaxcel are summarized below. In particular,
Vaxcel's Certificate and Bylaws contain several provisions that may be deemed to
have an anti-takeover effect in that they could impede or prevent an acquisition
of Vaxcel unless the potential acquirer has obtained the approval of Vaxcel's
Board. The following discussion is necessarily general; it is not intended to be
a complete statement of all differences affecting the rights of shareholders and
their respective entities, and it is qualified in its entirety by reference to
the PBCL and the DGCL as well as to Vaxcel's Certificate and Bylaws and Zynaxis'
Articles and Bylaws.
ANTI-TAKEOVER PROVISIONS GENERALLY
The provisions of Vaxcel's Certificate and Bylaws described below under the
headings, "Authorized Capital Stock," "Amendment of Certificate of Incorporation
and Bylaws," "Removal of Directors," "Limitations on Director Liability,"
"Special Meetings of Shareholders," "Actions by Shareholders Without a Meeting,"
and "Mergers, Consolidations, and Sales of Assets Generally," and the provisions
of the DGCL described under the heading "Business Combinations with Certain
Persons" are referred to herein as the "Protective Provisions." In general, one
purpose of the Protective Provisions is to assist Vaxcel's Board in playing a
role if any group or person attempts to acquire control of Vaxcel, so that the
Board can further protect the interests of Vaxcel and its shareholders as
appropriate under the circumstances, including, if the Vaxcel Board determines
that a sale of control is in their best interests, by enhancing the Board's
ability to maximize the value to be received by the shareholders upon such a
sale.
Although Vaxcel's management believes the Protective Provisions are,
therefore, beneficial to Vaxcel's shareholders, the Protective Provisions also
may tend to discourage some takeover bids. As a result, Vaxcel's shareholders
may be deprived of opportunities to sell some or all of their shares at prices
that represent a premium over prevailing market prices. On the other hand,
defeating undesirable acquisition offers can be a very expensive and
time-consuming process. To the extent that the Protective Provisions discourage
undesirable proposals, Vaxcel may be able to avoid those expenditures of time
and money.
The Protective Provisions also may discourage open market purchases by a
potential acquirer. Such purchases may increase the market price of Vaxcel
Common Stock temporarily, enabling shareholders to sell their shares at a price
higher than that which otherwise would prevail. In addition, the Protective
Provisions may decrease the market price of Vaxcel Common Stock by making the
stock less attractive to persons who invest in securities in anticipation of
price increases from potential acquisition attempts. The Protective Provisions
also may make it more difficult and time consuming for a potential acquirer to
obtain control of Vaxcel through replacing the Board of Directors and
management. Furthermore, the Protective Provisions may make it more difficult
for Vaxcel's shareholders to replace the Board of Directors or management, even
if a majority of the shareholders believe such replacement is in the best
interests of Vaxcel. As a result, the Protective Provisions may tend to
perpetuate the incumbent Board of Directors and management.
AUTHORIZED CAPITAL STOCK
Vaxcel. The Certificate authorizes the issuance of up to 30,000,000 shares
of Vaxcel Common Stock, of which 8,250,004 shares were issued as of
, 1997, and 2,000,000 shares of Vaxcel Preferred Stock of which no shares have
been issued. Vaxcel's shareholders do not have the preemptive right to purchase
or subscribe to any unissued authorized shares of Vaxcel Common Stock or any
option or warrant for the purchase thereof. Subject to the limitations set forth
in the DGCL, Vaxcel's Board may authorize the issuance of one or more classes,
or series thereof, of Vaxcel's Preferred Stock, without further action by
Vaxcel's shareholders.
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Zynaxis. Zynaxis' authorized capital stock consists of 25,000,000 shares
of Zynaxis Common Stock, of which, as of the Record Date, shares were
issued and outstanding and 2,000,000 shares of no par value Preferred Stock, of
which, as of the Record Date, shares were designated Series A Convertible
Preferred Stock and were issued and outstanding. Zynaxis' shareholders do not
have the preemptive right to purchase or subscribe to any unissued authorized
shares of Zynaxis Capital Stock or any option or warrant for the purchase
thereof. In addition, 500,000 shares of Preferred Stock of Zynaxis can be issued
in a new series by authorization of the Zynaxis Board without the approval of
the shareholders, except in certain instances prescribed by the PBCL.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
Vaxcel. The DGCL generally provides that the approval of a corporation's
board of directors and the affirmative vote of a majority of (i) all shares
entitled to vote thereon and (ii) the shares of each class of stock entitled to
vote thereon as a class, is required to amend a corporation's certificate of
incorporation, unless the certificate specifies a greater voting requirement.
The Certificate provides that the Vaxcel Board has the power to adopt, amend,
alter, change, or repeal the Bylaws.
Zynaxis. The PBCL requires the affirmative vote of the holders entitled to
cast at least a majority of the votes actually cast on an amendment to the
articles of incorporation, provided that shareholder approval is not required
for certain non-material amendments, such as a change in the corporate name, a
provision for perpetual existence or, if the corporation has only one class of
shares outstanding, a change in the number and par value of the authorized
shares to effect a stock split. The Zynaxis Articles provide that the Zynaxis
Articles may be amended as provided by the PBCL, and all rights conferred upon
the shareholders therein are granted subject to such reservation. Under
Pennsylvania law the power to adopt, amend or repeal bylaws may be vested by the
bylaws in the directors, with certain statutory exceptions for certain actions
and subject to the power of shareholders to change such action. Pennsylvania law
provides that unless the articles of incorporation otherwise provide, the board
of directors does not have the authority to adopt or change a bylaw on any
subject that is committed expressly to the shareholders by statute. The Zynaxis
Bylaws provide that the Zynaxis Bylaws may be amended by the Zynaxis
shareholders or, with respect to those matters not expressly committed to the
shareholders by statute, by the vote of a majority of the directors.
REMOVAL OF DIRECTORS
Vaxcel. Pursuant to the Bylaws, any director or the entire Vaxcel Board
may be removed with or without cause by the affirmative vote of the holders of a
majority of the shares of Vaxcel's voting stock.
Zynaxis. Under the PBCL, unless a bylaw adopted by the shareholders
provides otherwise, the entire board of directors, a class of the board where
the board is classified with respect to the power to select directors, or any
individual director, may be removed with or without cause by the holders of the
class or series of shares entitled to elect the class of directors, and by the
board of directors for any proper cause specified in the bylaws. Because the
Zynaxis Board is classified by directors elected by holders of Zynaxis Common
Stock and directors elected by holders of Zynaxis Preferred Stock, only the
holders of Zynaxis Common Stock may remove Zynaxis Common Stock directors and
only the holders of Zynaxis Preferred Stock may remove Zynaxis Preferred Stock
directors. The Zynaxis Bylaws provide that directors may be removed without
cause by the Zynaxis shareholders.
LIMITATIONS ON DIRECTOR LIABILITY
Vaxcel. The Certificate provides that a director of Vaxcel will have no
personal liability to Vaxcel or its shareholders for monetary damages for breach
of fiduciary duty as a director, except liability for (i) any breach of the
director's duty of loyalty to the corporation or its shareholders, (ii) acts or
omissions that are not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) the payment of certain unlawful dividends and
the making of certain unlawful stock purchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit.
49
<PAGE> 64
Although this provision does not affect the availability of injunctive or
other equitable relief as a remedy for a breach of duty by a director, it does
limit the remedies available to a shareholder who has a valid claim that a
director acted in violation of his duties, if the action is among those as to
which liability is limited. This provision may reduce the likelihood of
shareholder derivative litigation against directors and may discourage or deter
shareholders or management from bringing a lawsuit against directors for breach
of their duties, even though such action, if successful, might have benefited
Vaxcel and its shareholders. The SEC has taken the position that similar
provisions added to other corporations' certificates of incorporation would not
protect those corporations' directors from liability for violations of the
federal securities laws.
Zynaxis. Zynaxis' Bylaws generally provide that a director shall not be
held personally liable for any action taken or failure to take action, unless
(i) the director has breached or failed to perform his fiduciary duties and the
breach constitutes self-dealing, willful misconduct or recklessness, or (ii) the
director has been held liable under a criminal statute or for failure to pay
federal, state or local taxes.
INDEMNIFICATION
Vaxcel. Vaxcel's Certificate and Bylaws contain a provision which
generally provides that Vaxcel will indemnify its directors and Board-elected
officers to the full extent permitted by the DGCL. Under Section 145 of the DGCL
as currently in effect, other than in actions brought by or in the right of
Vaxcel, such indemnification would apply if it were determined in the specific
case that the proposed indemnitee acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of
Vaxcel and, with respect to any criminal proceeding, if such person had no
reasonable cause to believe that the conduct was unlawful. In actions brought by
or in the right of Vaxcel, such indemnification probably would be limited to
reasonable expenses (including attorneys' fees) and would apply if it were
determined in the specific case that the proposed indemnitee acted in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of Vaxcel, except that no indemnification may be made with
respect to any matter as to which such person is adjudged liable to Vaxcel,
unless, and only to the extent that, the court determines upon application that,
in view of all the circumstances of the case, the proposed indemnitee is fairly
and reasonably entitled to indemnity for such expenses as the court deems
proper. To the extent that any director, officer, employee, or agent of Vaxcel
has been successful on the merits or otherwise in defense of any action,
lawsuit, or proceeding, whether civil, criminal, administrative, or
investigative, such person must be indemnified against reasonable expenses
incurred by him in connection therewith. The Certificate and the Bylaws provide
that indemnification also may be extended to any other officers, agents or
employees of Vaxcel on a case-by-case basis.
Zynaxis. The Zynaxis Bylaws provide that directors, officers and any other
person designated by the Zynaxis Board are entitled to be indemnified as
provided in the Zynaxis Bylaws. Zynaxis will indemnify such a representative of
the corporation against any liability incurred in connection with any proceeding
in which the representative may be involved as a party or otherwise by reason of
the fact that such person is or was serving in an indemnified capacity,
including, without limitation, liabilities resulting from any actual or alleged
breach or neglect of duty, error, misstatement or misleading statement,
negligence, gross negligence or act giving rise to strict or products liability.
Such representatives are not entitled to indemnification (i) where such
indemnification is expressly prohibited by applicable law or has been finally
determined in a final adjudication to be otherwise unlawful, or (ii) where the
conduct of the representative has been finally determined to constitute willful
misconduct or recklessness or to be based upon or attributable to the receipt by
the representative from the corporation of a personal benefit to which the
representative is not legally entitled.
SPECIAL MEETINGS OF SHAREHOLDERS
Vaxcel. Vaxcel's Bylaws provide that such meetings may be called at any
time, by the Chairman of the Board, a majority of the Vaxcel Board, the
President, or at the request, in writing, of the holders of a majority of shares
of voting stock of Vaxcel entitled to vote at the special meeting of Vaxcel.
50
<PAGE> 65
Zynaxis. The Zynaxis Bylaws provide that special meetings of the
shareholders may be called at any time by resolution of the board of directors.
Under the PBCL, shareholders of a registered corporation, like Zynaxis, are not
entitled to call a special meeting of the shareholders.
ACTIONS BY SHAREHOLDERS WITHOUT A MEETING
Vaxcel. The Bylaws provide that any action required or permitted to be
taken at a meeting by Vaxcel shareholders may be effected by any written consent
by the shareholders.
Zynaxis. The PBCL provides that any action which may be taken at a meeting
of the shareholders may be taken without a meeting by less than unanimous
written consent of the shareholders who would have been entitled to vote at a
meeting if permitted by the articles of incorporation of a registered
corporation (of which Zynaxis is one). Zynaxis' Articles of Incorporation permit
shareholder action without a meeting by less than unanimous consent.
BUSINESS COMBINATIONS WITH CERTAIN PERSONS
Vaxcel. Section 203 of the DGCL ("Section 203") places certain
restrictions on "business combinations" (as defined in Section 203, generally
including mergers, sales and leases of assets, issuances of securities, and
similar transactions) by Delaware corporations with an "interested shareholder"
(as defined in Section 203, generally the beneficial owner of 15% or more of the
corporation's outstanding voting stock). Section 203 generally applies to
Delaware corporations that have a class of voting stock listed on a national
securities exchange, authorized for quotation on an interdealer quotation system
of a registered national securities association, or held of record by more than
2,000 shareholders, unless the corporation expressly elects in its certificate
of incorporation or bylaws not to be governed by Section 203.
Vaxcel has not specifically elected to avoid the application of Section
203. As a result, Section 203 generally would prohibit a business combination by
Vaxcel or a subsidiary with an interested shareholder within three years after
the person or entity becomes an interested shareholder, unless (i) prior to the
time when the person or entity became an interested shareholder, Vaxcel's Board
approved either the business combination or the transaction pursuant to which
such person or entity became an interested shareholder, (ii) upon consummation
of the transaction in which the person or entity became an interested
shareholder, the interested shareholder held at least 85% of the outstanding
Vaxcel voting stock (excluding shares held by persons who are both officers and
directors and shares held by certain employee benefit plans), or (iii) once the
person or entity became an interested shareholder, the business combination was
approved by Vaxcel's Board and by the holders of at least two-thirds of the
outstanding Vaxcel voting stock, excluding shares owned by the interested
shareholder.
Zynaxis. The PBCL provides that if a shareholder of a registered
corporation (of which Zynaxis is one) is a party to a sale of assets
transaction, share exchange, merger or consolidation involving the corporation
or a subsidiary, or if a shareholder is to be treated differently in a corporate
dissolution from other shareholders of the same class, then approval must be
obtained of the shareholders entitled to cast at least a majority of the votes
which all shareholders other than the interested shareholder are entitled to
cast with respect to the transaction, without counting the votes of the
interested shareholder. Such additional shareholder approval is not required if
the consideration to be received by the other shareholders in such transaction
for shares of any class is not less than the highest amount paid by the
interested shareholder in acquiring shares of the same class, or if the proposed
transaction is approved by a majority of the board of directors other than
certain directors ("disqualified directors") affiliated or associated with, or
nominated by, the interested shareholder. The PBCL provides that a director who
has held office for at least 24 months prior to the date of vote on the proposed
transaction is not a disqualified director.
Further, the PBCL prohibits certain "business combinations" between the
corporation and an "interested shareholder" except under specified
circumstances. An "interested shareholder" in this instance is one who, directly
or indirectly, is the beneficial owner of shares entitling that person to cast
at least 20% of the votes that all shareholders would be entitled to cast in an
election of directors of the corporation or is an affiliate or associate of such
corporation and at any time within the five-year period immediately prior to the
date in
51
<PAGE> 66
question was the beneficial owner, directly or indirectly, of shares entitling
that person to cast at least 20% of the votes that all shareholders would be
entitled to cast in an election of directors of the corporation. A "business
combination" includes a merger, consolidation, share exchange or division of the
corporation or any subsidiary of the corporation with the interested shareholder
or with, involving or resulting in any other corporation which is, or, after the
merger, consolidation, share exchange or division would be, an affiliate or
associate of the interested shareholder. A "business combination" also includes
a sale or other disposition to the interested shareholder or any affiliate or
associate of the interested shareholder of assets of the corporation or any
subsidiary (1) having an aggregate market value equal to 10% or more of the
aggregate market value of the corporation's consolidated assets, (2) having an
aggregate market value equal to 10% or more of the aggregate market value of all
the outstanding shares of such corporation, or (3) representing 10% or more of
the consolidated earning power or net income of such corporation. A "business
combination" also includes certain transactions with an interested shareholder
involving the issuance of shares of a corporation or its subsidiary having an
aggregate market value equal to 5% or more of the aggregate market value of all
outstanding shares under certain circumstances, the adoption of a plan for the
liquidation or dissolution of the corporation pursuant to certain agreements
with an interested shareholder and certain reclassifications and loans involving
the interested shareholder. The prohibition against such business combinations
does not apply under specified circumstances and if the corporation has opted
out of this provision. Zynaxis has not opted out of this statutory provision.
MERGERS, CONSOLIDATIONS, AND SALES OF ASSETS GENERALLY
Vaxcel. Under the DGCL generally a merger, consolidation, share exchange,
dissolution or sale of substantially all of a corporation's assets other than in
the ordinary course of business must be approved by the affirmative vote of a
majority of the votes cast by all shareholders entitled to vote thereon. Neither
the Vaxcel Certificate nor the Vaxcel Bylaws contain a provision relating to the
approval of mergers, consolidations, share exchanges, dissolutions or sales of
assets.
Zynaxis. The PBCL provides that the affirmative vote of a majority of the
votes cast is required to effect a merger, consolidation, share exchange,
dissolution or sale of substantially all of a corporation's assets other than in
the ordinary course of business.
DISSENTERS' RIGHTS OF APPRAISAL
Vaxcel. The rights of appraisal of dissenting shareholders of Vaxcel are
governed by the DGCL. Pursuant thereto, except as described below, any
shareholder has the right to dissent from any merger of which Vaxcel could be a
constituent corporation. No appraisal rights are available, however, for (i) the
shares of any class or series of stock that is either listed on a national
securities exchange, quoted on the Nasdaq National Market, or held of record by
more than 2,000 shareholders or (ii) any shares of stock of the constituent
corporation surviving a merger if the merger did not require the approval of the
surviving corporation's shareholders, unless, in either case, the holders of
such stock are required by an agreement of merger or consolidation to accept for
that stock something other than: (a) shares of stock of the corporation
surviving or resulting from the merger or consolidation; (b) shares of stock of
any other corporation that will be listed at the effective time of the merger on
a national securities exchange, quoted on the Nasdaq National Market, or held of
record by more than 2,000 shareholders; (c) cash in lieu of fractional shares of
stock described in clause (a) or (b) immediately above; or (d) any combination
of the shares of stock and cash in lieu of fractional shares described in
clauses (a) through (c) immediately above.
Zynaxis. Under the PBCL, shareholders may perfect dissenters' rights with
regard to corporate actions involving certain mergers, consolidations, and the
sale, lease or exchange of substantially all the assets of the corporation
(under limited circumstances). However, under the PBCL, dissenters' rights may
be denied when a corporation's shares are listed on a national securities
exchange or held of record by more than 2,000 persons.
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<PAGE> 67
SHAREHOLDERS' RIGHTS TO EXAMINE BOOKS AND RECORDS
Vaxcel. The DGCL provides that a shareholder may inspect books and records
upon written demand under oath stating the purpose of the inspection, if such
purpose is reasonably related to such person's interest as a shareholder.
Zynaxis. Pursuant to the PBCL, Zynaxis' shareholders generally have the
right to inspect in person or by agent or attorney and copy certain of Zynaxis'
corporate documents, upon a verified written demand stating a proper purpose for
such inspection.
DIVIDENDS
Vaxcel. The DGCL provides that, subject to any restrictions in the
corporation's certificate of incorporation, dividends may be declared from the
corporation's surplus, or, if there is no surplus, from its net profits for the
fiscal year in which the dividend is declared and the preceding fiscal year.
Dividends may not be declared, however, if the corporation's capital has been
diminished to an amount less than the aggregate amount of all capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets.
Zynaxis. Zynaxis has not paid any dividends on the Zynaxis Common Stock to
date. Zynaxis currently intends to retain its cash to finance current needs and
therefore does not intend to pay any cash dividends prior to the Effective Time
of the Merger.
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<PAGE> 68
COMPARATIVE MARKET PRICES AND DIVIDENDS
Because Vaxcel is a wholly owned subsidiary of CytRx, Vaxcel Common Stock
is not traded in any established market. Zynaxis Common Stock was, until
December 23, 1996, quoted on the Nasdaq SmallCap Market under the symbol "ZNXS."
Currently, Zynaxis Common Stock is not traded in any established market. The
following table sets forth, for the indicated periods, the high and low closing
sale prices for Zynaxis Common Stock as reported on the Nasdaq SmallCap Market
(or the Nasdaq National Market for the periods prior to the fourth quarter of
1995) or as known by management of Zynaxis. Neither Vaxcel nor Zynaxis has ever
declared a cash dividend on the shares of Vaxcel Common Stock and Zynaxis Common
Stock, respectively, issued and outstanding.
<TABLE>
<CAPTION>
ZYNAXIS
------------
PRICE RANGE
------------
HIGH LOW
----- ----
<S> <C> <C>
1994
First Quarter................................................. 5 2 7/8
Second Quarter................................................ 3 1/8 2 1/4
Third Quarter................................................. 2 7/8 1 3/4
Fourth Quarter................................................ 2 1/4 1 1/8
1995
First Quarter................................................. 2 1/8 1
Second Quarter................................................ 1 7/8 1
Third Quarter................................................. 2 1/4 15/1
Fourth Quarter................................................ 1 1/2 5/8
1996
First Quarter................................................. 1 3/8 5/8
Second Quarter................................................ 1 3/4 3/4
Third Quarter................................................. 1 5/32 7/1
Fourth Quarter................................................
</TABLE>
On , 1997, the last reported sale price of Zynaxis Common
Stock that management of Zynaxis is aware of was $ . On December 5, 1996,
the last business day prior to public announcement of the proposed Merger, the
last reported sale price of Zynaxis Common Stock as reported on the Nasdaq
SmallCap Market was $0.1875.
54
<PAGE> 69
PRO FORMA FINANCIAL INFORMATION
The following pro forma financial information gives effect to the proposed
Merger. The pro forma condensed combined financial statements have been prepared
by management of Vaxcel and should be read in conjunction with the historical
financial statements of Vaxcel and Zynaxis. The historical balances represent
the financial position and results of operations for each company and have been
prepared in accordance with generally accepted accounting principles. The pro
forma statements are based on certain assumptions and preliminary estimates
which are subject to change. These statements do not purport to be indicative of
the financial position or results of operations that might have occurred, nor
are they necessarily indicative of future results.
The Pro Forma Condensed Combined Balance Sheet as of September 30, 1996 has
been prepared to give pro forma effect to the Merger as if the Merger had
occurred on September 30, 1996. The Pro Forma Condensed Combined Statements of
Operations for the year ended December 31, 1995 and for the nine months ended
September 30, 1996 have been prepared to give pro forma effect to the Merger as
if the Merger had occurred on January 1, 1995 and January 1, 1996, respectively.
The shares used in computing pro forma net loss per common share assumes the
Merger had occurred as of January 1, 1995 for the year ended December 31, 1995,
and January 1, 1996 for the nine months ended September 30, 1996. No assumptions
are made regarding additional issuances of shares of Vaxcel Common Stock
subsequent to the Merger.
The Merger will be accounted for as a purchase transaction with Vaxcel as
the acquiring company. The total estimated Zynaxis purchase price of $4,000,000
has been allocated to the fair market value of the assets acquired and the
liabilities assumed.
55
<PAGE> 70
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------- PRO FORMA PRO FORMA
VAXCEL ZYNAXIS ADJUSTMENTS COMBINED
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..... $ 18,832 $ 223,177 $ 3,350,000(1) $ 3,592,009
Accounts receivable........... 6,363 134,111 -- 140,474
Other current assets.......... -- 87,717 -- 87,717
----------- ------------ ------------ -----------
25,195 445,005 3,350,000 3,820,200
Property and equipment, net........ 108,076 2,060,383 (210,383)(2) 1,958,076
Acquired intangible assets......... -- -- 2,822,087 (6) 2,822,087
Other assets:
Note receivable............... -- 314,516 -- 314,516
Other assets.................. 35,674 113,365 -- 149,039
----------- ------------ ------------ -----------
35,674 427,881 -- 463,555
----------- ------------ ------------ -----------
Total assets............. $ 168,945 $ 2,933,269 $ 5,961,704 $ 9,063,918
=========== ============ ============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.............. $ 8,991 $ 863,147 $ -- $ 872,138
Accrued liabilities........... 46,098 335,544 (14,779)(3) 366,863
Notes payable to
shareholders................ -- 450,000 (350,000)(3) 100,000
Other current liabilities..... -- 103,974 -- 103,974
----------- ------------ ------------ -----------
55,089 1,752,665 (364,779) 1,442,975
Long-term debt and other long-term
obligations...................... -- 157,087 -- 157,087
Shareholders' equity:
Preferred stock............... -- 2,554,305 (2,554,305)(4) --
Common Stock.................. 8,200 102,980 (100,180)(5) 11,000
Additional Paid-in capital.... 4,297,800 45,881,678 (38,534,478)(5) 11,645,000
Accumulated deficit........... (4,192,144) (47,515,446) 47,515,446 (5) (4,192,144)
----------- ------------ ------------ -----------
113,856 1,023,517 6,326,483 7,463,856
----------- ------------ ------------ -----------
Total liabilities and
shareholders' equity... $ 168,945 $ 2,933,269 $ 5,961,704 $ 9,063,918
=========== ============ ============ ===========
</TABLE>
- ---------------
Pro Forma Adjustments:
(1) Cash contribution by CytRx, net of transaction-related costs.
(2) Write-down of property and equipment to estimated fair market value.
(3) Conversion of the Zynaxis Notes and accrued interest into Vaxcel Common
Stock (at the Merger transaction price) as a condition of the Merger.
(4) Conversion of Zynaxis Preferred Stock into Vaxcel Common Stock (at the
Merger transaction price) as a condition of the Merger.
(5) Adjustment represents the new equity arising from the issuance of Vaxcel
Common Stock to complete the Merger, less the actual historical equity of
Zynaxis prior to the Merger.
(6) Allocation of purchase price in excess of net assets acquired to intangible
assets, including technology rights from SRI and a development and
licensing agreement with ALK.
56
<PAGE> 71
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------------- PRO FORMA PRO FORMA
VAXCEL ZYNAXIS ADJUSTMENTS COMBINED
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
License fees.................... $ 50,000 $ -- $ 50,000
Collaborative, contract and
grant revenue................. 30,635 1,689,205 1,719,840
==========
--------- -----------
80,635 1,689,205 1,769,840
Operating Expenses
Research and development........ 540,744 2,781,827 $(248,885)(1) 3,073,686
General and administrative...... 316,663 1,333,356 93,298 (4) 1,743,317
--------- ----------- ----------- -----------
857,407 4,115,183 (155,587) 4,817,003
--------- ----------- ----------- -----------
Other Income (expense):
Interest income................. 6,459 42,687 49,146
Interest expense................ -- (31,731) 14,779 (2) (16,952)
Other income.................... -- 420,346 420,346
--------- ----------- ----------- -----------
6,459 431,302 14,779 (2) 452,540
--------- ----------- ----------- -----------
Net loss............................. $(770,313) $(1,994,676) $ 170,366 $(2,594,623)
========= ========== ========= ==========
Net loss per common share............ $ (0.10) $ (0.20) $ (0.24)(3)
========= ========== ==========
</TABLE>
- ---------------
Pro Forma Adjustments:
(1) Adjustment to depreciation expense associated with property write-down to
fair market value.
(2) Adjustment to eliminate interest expense associated with Zynaxis Notes
converted into Vaxcel Common Stock.
(3) The average number of shares of Vaxcel Common Stock outstanding used to
calculate pro forma net loss per common share is based on the presumption
that there would be 11,000,000 shares of Vaxcel Common Stock outstanding
upon the assumed effective date of the Merger.
(4) Amortization of intangible assets acquired.
57
<PAGE> 72
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------- PRO FORMA PRO FORMA
VAXCEL ZYNAXIS ADJUSTMENTS COMBINED
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues
Net sales................... $ -- $ 141,189 $ 141,189
License fees................ 115,000 -- 115,000
Collaborative, contract and
grant revenue............. 6,709 620,603 627,312
----------- ------------ ------------
121,709 761,792 883,501
Operating Expenses
Cost of sales............... -- 40,262 40,262
Research and development.... 894,754 5,168,912 $(519,795)(1) 5,543,871
General and
administrative............ 534,542 2,239,921 40,099 (3) 2,814,562
Write-off of patent costs... 128,216 -- 128,216
Charge for acquired research
and development........... -- 5,165,793 5,165,793
Restructuring charge........ -- 347,436 347,436
----------- ------------ ---------- ------------
1,557,512 12,962,324 (479,696) 14,040,140
----------- ------------ ---------- ------------
Other Income (Expense):
Interest income............. 56,998 80,919 137,917
Interest expense............ -- (36,896) (36,896)
Net gain on sale of
diagnostic technologies... -- 1,616,840 1,616,840
Other income................ -- 162,232 162,232
----------- ------------ ------------
56,998 1,823,095 1,880,093
----------- ------------ ---------- ------------
Net loss......................... $(1,378,805) $(10,377,437) $(479,696) $(11,276,546)
=========== ============ ========== ============
Net loss per common share........ $ (0.17) $ (1.57) $ (1.03)(2)
=========== ============ ============
</TABLE>
- ---------------
Pro Forma Adjustments:
(1) Adjustment to depreciation expense associated with property write-down to
fair market value.
(2) The average number of shares of Vaxcel Common Stock outstanding used to
calculate pro forma net loss per common share is based on the presumption
that there would be 11,000,000 shares of Vaxcel Common Stock outstanding
upon the assumed effective date of the Merger.
(3) Amortization of intangible assets acquired.
58
<PAGE> 73
SELECTED HISTORICAL FINANCIAL DATA OF VAXCEL
The selected financial data as of December 31, 1995 and for each of the two
years in the period ended December 31, 1995, and for the period from inception
(at January 6, 1993) through December 31, 1993, is derived from the financial
statements of Vaxcel, which are included herein. Such financial statements have
been audited by Ernst & Young LLP, independent auditors of Vaxcel. The selected
statement of operations data for the nine months ended September 30, 1995 and
1996 and the selected balance sheet data as of September 30, 1996, have been
derived from unaudited financial statements of Vaxcel, that, in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for fair presentation of such data at such dates and for
such periods in accordance with generally accepted accounting principles. The
selected financial data for the nine months ended September 30, 1996 are not
necessarily indicative of the results to be expected for the full year. The
following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Vaxcel" and the financial statements of Vaxcel and notes thereto
included in this Proxy Statement.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JANUARY 6,
FOR THE FOR THE 1993)
NINE MONTHS ENDED YEARS ENDED THROUGH
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------------------------ ------------------------------ ------------
1996 1995 1995 1994 1993
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues............................ $ 80,635 $ 25,000 $ 121,709 $ 500,814 $ 506,317
Operating Expenses:
Cost of sales....................... -- -- -- 72,636 74,066
Research and development............ 540,744 559,965 894,754 570,548 791,996
Marketing, general and
administrative.................... 316,663 364,794 534,542 845,901 1,027,803
Write-off of patent costs........... -- 128,216 128,216 -- --
--------- ----------- ------------ ------------ ------------
857,407 1,052,975 1,557,512 1,489,085 1,893,865
Other Income (Expense):
Interest income (expense), net...... 6,459 47,930 56,998 (111,572) (55,635)
Sale of animal adjuvant rights...... -- -- -- 500,000 --
--------- ----------- ------------ ------------ ------------
6,459 47,930 56,998 388,428 (55,635)
Net loss................................ $(770,313) $ (980,045) $ (1,378,805) $ (599,843) $ (1,443,183)
========= =========== ============ ============ ============
Net loss per common share............... $ (.10) $ (.12) $ (.17) $ (.09) $ (.24)
========= =========== ============ ============ ============
Shares used in computing net loss per
common share.......................... 8,058,029 8,000,000 8,000,000 6,826,027 6,000,000
<CAPTION>
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
------------- -----------------------------------------------
1996 1995 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........... $ 18,832 $ 515,522 $ 527,948 $ 40,423
Working capital..................... (29,894) 402,861 521,913 (45,117)
Total assets........................ 168,945 701,868 1,043,575 825,900
Stockholder's equity................ 113,856 584,169 962,974 (1,437,183)
</TABLE>
59
<PAGE> 74
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS AND OPERATIONS OF VAXCEL
GENERAL
In conjunction with Vaxcel's organization and commencement of operations in
January 1993, Vaxcel entered into certain licensing agreements with CytRx which
granted Vaxcel exclusive rights to OPTIVAX(R), a vaccine adjuvant being
developed by Vaxcel for use in human vaccines, and to Titermax(R), a vaccine
adjuvant marketed by Vaxcel exclusively for research purposes. In December 1994
Vaxcel relinquished its rights to Titermax, as discussed below.
FINANCIAL CONDITION AND LIQUIDITY
At September 30, 1996 Vaxcel had cash and cash equivalents of $18,832 and
net assets of $113,856 compared to $515,522 and $584,169, respectively, at
December 31, 1995, and $527,948 and $962,974, respectively, at December 31,
1994.
Since its inception Vaxcel has incurred operating losses and has been
economically dependent upon CytRx to provide the funding necessary to conduct
its operations. During 1994 and 1993 the principal source of capital was from a
$3,000,000 line of credit provided by CytRx pursuant to two convertible
promissory notes. In July and August 1994, the full amount of the debt owed to
CytRx ($3,000,000) was converted into shares of Vaxcel Common Stock. Since then,
additional cash funding has been provided by CytRx as needed by Vaxcel through
the direct purchase of shares of Vaxcel Common Stock.
Vaxcel's primary requirement for capital will be to continue its
development activities for OPTIVAX and technologies acquired pursuant to the
Merger (PLG microspheres and mucoadhesives) and for general corporate purposes.
Substantial losses are expected over the next several years resulting primarily
from research and development expenses. Management anticipates to partially
offset these losses with revenues generated from corporate collaborations.
CytRx has firmly committed to provide a substantial level of capital
funding subject to the Closing of the Merger. Management believes that the net
proceeds of CytRx's cash contribution pursuant to the Merger, combined with cash
on hand, will be sufficient to support Vaxcel's operation for the next two
years. Management expects that proceeds from corporate partnering arrangements
may further supplement Vaxcel's liquidity and capital resources. In the event
the Merger is not consummated, CytRx has expressed its commitment to continue
financial support of Vaxcel's operations as necessary at least through 1997.
Vaxcel will consider additional sources of funding as appropriate and available.
RESULTS OF OPERATIONS
During 1994 and the period from inception (January 6, 1993) through
December 31, 1993 (the "1993 Period"), Vaxcel reported net sales of $500,814 and
$506,317, respectively, related to Titermax. In December 1994, CytRx repurchased
the rights to Vaxcel's OPTIVAX technology for use in non-human animals,
including the rights to Titermax, for $500,000. Cost of sales and selling and
marketing expense during 1994 and the 1993 Period related entirely to sales of
Titermax. Selling and marketing expense declined from $444,512 during the 1993
Period to $181,542 during 1994 due to a reduction in Vaxcel's marketing staff
and an overall reduction in promotional activities related to Titermax.
During the nine months ended September 30, 1996 and 1995 and the year ended
December 31, 1995, Vaxcel reported license fee income of $50,000, $25,000, and
$115,000, respectively, representing initial payments pursuant to its agreements
with Connaught Laboratories, Inc., Corixa Corporation and Medeva Europe Limited
related to OPTIVAX.
Investment income was $56,998 during 1995, as compared to $8,072 during
1994 and $0 during the 1993 Period. Investment income was $6,459 during the nine
months ended September 30, 1996, as compared to $47,930 during the same period
in 1995. During the 1993 Period and much of 1994 no excess cash balances were
carried by Vaxcel as expenditures were funded by CytRx on an as-needed basis,
pursuant to a convertible
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line of credit. During 1995, Vaxcel benefited from excess cash balances carried
over from the December 1994 sale of non-human adjuvant rights to CytRx, as well
as an additional $1,000,000 cash contribution by CytRx in January 1995. During
the nine month period ended September 30, 1996, investment income declined due
to lower cash balances; CytRx continues to provide financial support through
periodic purchases of Vaxcel Common Stock.
Research and development expenditures were $894,754 during 1995, as
compared to $570,548 during 1994 and $791,996 during the 1993 Period. The
decrease from 1993 to 1994 is attributable to staff reductions and a scale-back
in the OPTIVAX development program during the second half of 1994 as Vaxcel
sought to conserve cash resources. Subsequent to the sale of non-human adjuvant
rights in December 1994 and an additional cash infusion by CytRx in January
1995, Vaxcel accelerated its development efforts. Research and development
expenditures were $540,744 during the nine months ended September 30, 1996, as
compared to $559,965 during the same period in 1995.
General and administrative expenses were $534,542 during 1995, $664,359
during 1994 and $583,291 during the 1993 Period. The increase from 1993 to 1994
primarily related to staff additions, including the addition of Vaxcel's
President and Chief Executive Officer who was hired during the second half of
1993. The decline from 1994 to 1995 was due to subsequent staff reductions and
other cash conservation measures taken in late 1994, including the relocation of
Vaxcel's operations from its leased facility to CytRx's headquarters. In January
1996 Vaxcel subleased its former facility at a full recovery of its ongoing
carrying cost. General and administrative expenses were $316,663 during the nine
month period ended September 30, 1996, as compared to $364,794 during the same
period during 1995. This decline is due primarily to savings realized from
subleasing Vaxcel's former facility. As discussed in Note 2 to the Vaxcel
financial statements, during 1995, Vaxcel recorded a one-time charge of $128,216
related to a change in the method of accounting for patent costs.
Interest expense of $119,644 and $55,635 during 1994 and the 1993 Period,
respectively, relates entirely to interest accrued on two convertible lines of
credit from CytRx. The outstanding principal and accrued interest under these
loans was converted into Vaxcel Common Stock in July and August 1994.
IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board ("the FASB") issued
Statement of Financial Accounting Standards No. 121 ("Statement No. 121") which
established accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill. Vaxcel adopted Statement No. 121
in the first quarter of 1996, and such adoption had no material effect on its
financial statements.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 ("Statement No. 123") which provides an alternative to
Accounting Principles Board Opinion No. 25 ("Opinion No. 25") in accounting for
stock-based compensation issued to employees. For companies that continue to
account for stock-based compensation arrangements under Opinion No. 25,
Statement No. 123 requires disclosure of the pro forma effect on net income and
earnings per share of its "fair value" based accounting for those arrangements,
effective for fiscal years beginning after December 15, 1995. Vaxcel plans to
continue accounting for stock option grants in accordance with Opinion No. 25,
and, accordingly, recognizes no compensation expense for stock option grants.
Vaxcel will make the additional disclosures required by Statement No. 123
beginning with its annual financial statements as of and for the year ended
December 31, 1996.
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BUSINESS OF VAXCEL
GENERAL
Executive Summary. Vaxcel is currently a wholly-owned subsidiary of CytRx
engaged in the development and commercialization of OPTIVAX(R), the tradename
for a family of proprietary nonionic block copolymers which may augment or
modulate the immune response to vaccines when administered injectably. Vaxcel
derives its rights to OPTIVAX from an exclusive, worldwide license agreement
with CytRx. Vaxcel believes OPTIVAX may improve the effectiveness and/or
convenience of existing vaccines and may contribute to the development of new
vaccines. Vaxcel and its institutional/corporate collaborators have conducted
preclinical studies in which OPTIVAX appears to act both as a delivery system
and as a vaccine adjuvant. In addition, Vaxcel initiated a Phase I trial in
early 1996 to help demonstrate that OPTIVAX was safe and adjuvant active in
humans when given by the injectable route. The results from this Phase I trial
are expected in the first quarter of 1997. Vaxcel's business strategy is to
license OPTIVAX on a vaccine-by-vaccine basis to pharmaceutical and
biotechnology companies engaged in vaccine research and development. Under such
arrangements, these companies would combine OPTIVAX with their vaccines and
assume responsibility for product development, regulatory approval, and
marketing at their expense. In return, Vaxcel would receive licensing fees,
milestone payments, and royalty on sales. At present, Vaxcel has entered into
option agreements for the development of OPTIVAX with Medeva PLC ("Medeva") and
Connaught Laboratories, Inc. ("Connaught") and a license agreement with Corixa
Corporation ("Corixa").
As a result of the Merger, Vaxcel will acquire the PLG microencapsulation
and mucoadhesive vaccine technologies of Zynaxis. These technologies appear to
be complementary to Vaxcel's current technology, as OPTIVAX is primarily focused
on enhancing the effectiveness of injectable vaccines, while the Zynaxis
technologies are primarily targeted toward development of vaccines for oral and
mucosal delivery. Vaxcel believes the Zynaxis oral delivery technologies may
have commercial application for many marketed vaccines currently administered by
parenteral injection, as well as certain new vaccines under development. In
addition, the Zynaxis technologies can be administered alone or in combination
with other vaccine carriers, delivery systems, and adjuvants. Similar to
OPTIVAX, Vaxcel's business strategy for the PLG microencapsulation and
mucoadhesive vaccine technologies will be to license these technologies to
companies engaged in vaccine research and development. In September 1995, ALK
executed a development and licensing agreement which granted ALK exclusive,
worldwide rights to evaluate and develop the Zynaxis technologies for oral
delivery of bioactive substances for the treatment of allergy. ALK is a world
leader in the preparation and standardization of allergen extracts for allergy
immunotherapy. ALK is currently conducting a Phase II human clinical trial.
Vaccines
One of the most desirable and cost effective ways to control a disease is
to prevent it from ever occurring. Vaccines are medicines designed to prevent
the occurrence of diseases by stimulating the body's natural defenses, the
immune system. In some circumstances, when an individual is exposed to a
pathogen (a microbial organism which causes disease), the body's immune system
may not react quickly enough to prevent it from causing disease. After repeated
exposure to the pathogen, however, the immune system may recognize the organism
and develop an immune response to prevent or eliminate the disease. This ability
of the immune system to "remember" is the basis for immunization. By vaccinating
people with antigens, which are components of pathogens, subsequent exposure to
the pathogen should result in an effective immune response, thereby protecting
the individual from the disease.
The Vaccine Market
According to industry publications, annual worldwide sales for vaccines has
grown quite dramatically during the past decade, from approximately a few
hundred million dollars in the early 1980s to over $3 billion dollars today. At
present, there are 16 vaccines in routine use in the United States which protect
individuals against major diseases such as polio, tetanus, diphtheria,
pertussis, hepatitis A and B, measles, mumps, rubella, Haemophilus influenzae
type B, chickenpox, influenza, and pneumococcal pneumonia.
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The vaccine market is expected to continue to grow at double-digit rates in
the future. Discussed below are several factors that have contributed to the
historical double-digit growth of the vaccine market and are expected to help
fuel strong growth in the future:
- New Vaccine Introductions: New techniques in molecular genetics and
biology, as well as a better understanding of the human immune process,
have increased the probability that new vaccines can be successfully
developed. These advances in medical technology have already contributed
to the licensure and commercialization of new vaccines within the past
few years. Industry publications estimate that many new vaccines are in
various stages of development and could be marketable within the next
decade.
- Favorable Environment for Vaccines: Immunization programs are supported
by state and federal governments and managed health care organizations
because of their favorable impact on reducing both the incidence and cost
of disease. This support for vaccines is critical as both the private and
public sectors debate methods for controlling rising health care costs.
- Antibiotic Resistance: Not too long ago, antibiotics were considered to
be "wonder drugs." Unfortunately, certain bacteria are becoming
increasingly resistant to currently available antibiotics. Vaccines are
one of the most promising alternatives for dealing with the growing
problem of antibiotic resistance.
- Success of Vaccine Programs: Vaccines may have contributed more to
disease eradication and reduction than any other modern medical
intervention as some of the most devastating human diseases (polio,
tetanus, measles, and others) have been significantly controlled by safe
and effective vaccines. Many health experts believe similar successes can
be achieved with future vaccines.
- Cost Effectiveness of Vaccines: Because of their ability to prevent
diseases from occurring, vaccines are one of the most cost-effective
methods for controlling health care costs. The Centers for Disease
Control and Prevention ("CDC") estimates that every dollar spent on
immunization in the United States saves $16 in health care costs. This
positive cost/benefit ratio is powerful data given global efforts to
control disease and associated health care costs.
- Reduced Vaccine Liability: During the mid 1980s, manufacturers were
exposed to significant expenditures associated with lawsuits arising from
alleged vaccine associated side effects. In an effort to foster
development of new vaccines and protect the supply of existing vaccines,
the United States federal government enacted the National Childhood
Vaccine Injury Act ("NCVI Act"), which established a trust mechanism to
limit manufacturers' liability associated with certain pediatric
vaccines.
- Improvement of Existing Vaccines: Some currently available vaccines
require multiple doses in order to adequately protect an individual and
others are only marginally effective. Technological improvements in
formulations that could address the shortcomings of existing vaccines
could further expand the dollar size of the vaccine market.
Need for Enhanced Vaccine Adjuvants/Delivery Systems. Adjuvants are
compounds that augment or modulate immune responses when administered in
conjunction with a vaccine. Delivery systems are compounds which appropriately
target vaccines to cells of the immune system. Vaxcel believes there are several
strong medical/technical needs in the market for adjuvants/delivery systems
which will enhance the effectiveness and/or convenience of both vaccines
currently on the market and vaccines under development, including:
- Reduce Number of Doses: Many currently marketed injectable vaccines
require multiple doses and several visits to a physician or medical
center to adequately protect individuals against disease. This is a
complex and costly procedure that often leads to noncompliance by
individuals and higher costs to society. Therefore, benefits would be
gained by reducing the number of required injections with an effective
vaccine adjuvant/delivery system.
- Increase Effectiveness of Existing Vaccines: Some currently marketed
injectable vaccines are only marginally effective, and consequently,
patients contract disease even though they are properly
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immunized. Safe and effective adjuvants/delivery systems may increase the
effectiveness of marginally effective vaccines, thereby improving patient
response rates.
- Increase Potency of New Vaccines: A promising approach to new vaccine
development is the area of subunit injectable vaccines. These subunit
vaccines are highly purified, as only the active components of the
microorganism are used in the formulation. While promising, many new
subunit vaccine candidates are poorly immunogenic or induce inappropriate
immune responses, and therefore, lack the efficacy required for FDA
approval. Safe and effective adjuvants/delivery systems may enhance the
effectiveness of injectable subunit vaccines, thereby providing the
required efficacy for approval and ultimate commercialization.
- Aid Development of Combination Vaccines: Today, children receive
multiple injections per physician visit in order to become properly
immunized. One strategy for reducing the number of injections required is
to combine several vaccines into a single formulation. Safe and effective
adjuvants delivery systems may aid in the development of combination
vaccines.
- Aid in Development of Oral Vaccines: Oral immunization has advantages
over injectable vaccines, including patient acceptability, ease of
administration, and induction of mucosal immunity. Adjuvants/ delivery
systems which could possibly lead to the development of additional oral
vaccines should be attractive in the marketplace.
Vaxcel's Adjuvant/Vaccine Delivery System Technologies. Prior to the
Merger, Vaxcel has been totally focused on development and commercialization of
OPTIVAX. After consummation of the Merger, Vaxcel will possess a portfolio of
proprietary injectable and oral vaccine adjuvants and delivery systems which are
designed to improve the effectiveness and/or convenience of currently marketed
vaccines and vaccines under development. The following table summarizes the
portfolio of technologies Vaxcel will possess once the Merger with Zynaxis is
consummated:
<TABLE>
<CAPTION>
ADJUVANT/DELIVERY ROUTE OF
SYSTEM COMPOSITION ADMINISTRATION
- ------------------- -------------------------- -------------
<S> <C> <C>
OPTIVAX Nonionic Block Copolymers Injectable
Microencapsulation PLG Oral
Mucoadhesives Mucoadhesive Polymers Oral & Nasal
</TABLE>
Discussed below is a brief description and current status of development of
OPTIVAX and the Zynaxis technologies.
Vaxcel's Injectable Technology. Vaxcel is developing OPTIVAX, the
tradename for a family of proprietary nonionic block copolymers which augment or
modify the immune response to vaccines when administered injectably. Each
copolymer molecule consists of a hydrophobic polyoxypropylene ("POP") core block
and hydrophilic polyoxyethylene ("POE") blocks on the ends. The ratio of POP to
POE and the molecular weight of the copolymers represent the proprietary
features of the molecule and are two factors that may dictate the ability of
OPTIVAX to enhance the activity of injectable vaccines.
OPTIVAX is combined with an antigen, and in some instances other active or
inactive ingredients, to form a final vaccine formulation. OPTIVAX can
self-assemble into microparticles in saline solutions, and can therefore, be
used in the absence of oils and other surfactants which may contribute to
toxicities. This simple aqueous environment also preserves the integrity of the
antigen. OPTIVAX appears to act both as a delivery system that targets vaccines
to cells of the immune system and as a vaccine adjuvant that augments the immune
system's response to vaccines.
Preclinical studies have been performed at Vaxcel and with
institutional/corporate collaborators to characterize the activity of injectable
OPTIVAX as an adjuvant/delivery system, including the following:
- Vaxcel concluded a study evaluating the magnitude, kinetics, duration and
function of antibody responses induced by a commercially available
injectable trivalent influenza virus vaccine supplemented with several
block copolymers. The results of this study demonstrated the adjuvant
activity of
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OPTIVAX in animals and allowed for the identification of a certain
copolymer, termed OPTIVAX CRL1005 copolymer, for possible use with this
type of vaccine. The OPTIVAX CRL1005 copolymer increased the levels of
antibodies specific for total virus preparations and HAI antibody
responses in mice by approximately ten-fold.
- Vaxcel completed a study of the OPTIVAX CRL1005 copolymer in combination
with a currently marketed injectable influenza virus vaccine in non-human
primates, a species that is more similar to humans than mice. In this
study, the influenza vaccine alone proved to be only marginally
immunogenic in these animals and required two immunizations to induce
any detectable serum antibodies. However, the immunogenicity of the
vaccine was increased by the addition of the OPTIVAX CRL1005 copolymer
which augmented responses to both the influenza B virus and the
influenza A virus strains.
- In a study comparing the OPTIVAX CRL1005 copolymer to certain competitive
injectable adjuvants, the activity of OPTIVAX CRL1005 copolymer in
animals was comparable to or greater than these competitive adjuvants
with respect to antibody responses, cytokines produced following antigen
stimulation, and cytotoxic T-lymphocyte ("CTL") responses. The OPTIVAX
CRL1005 copolymer augmented antibody responses greater than certain
single component adjuvants and was comparable to certain multicomponent
systems. Vaxcel also demonstrated that OPTIVAX CRL1005 copolymer
augmented both Type-l and Type-2 cytokine responses and induced CTL.
- As part of an IND application filed with the FDA in late 1995, Vaxcel
preclinically tested the injectable OPTIVAX CRL1005 copolymer in
combination with a synthetic peptide based on the beta chain of human
chonionic gonadotropin ("(LOGO)hCG") conjugated to diphtheria toxoid
("DT"). In this study, the OPTIVAX CRL1005 copolymer augmented antibody
responses specific for (LOGO)hCG to levels comparable to a Complete
Freund's Adjuvant-like water-in-oil emulsion.
- In addition to the OPTIVAX CRL1005 copolymer, Vaxcel has also evaluated a
series of injectable copolymers with POP core units identical in size to
CRL1005 (12,000), but with increasing concentrations of POE (2.5%-20%).
Copolymers with POP core sizes ranging from 9,000 to 15,000 have also
been evaluated.
Vaxcel evaluated the adjuvant activity of these different, but related,
injectable OPTIVAX copolymers in animals using two different protein
immunogens: a currently marketed influenza virus vaccine and ovalbumin
("OVA"). The copolymers with the lowest POE concentration (2.5%-5.0%)
functioned best with the influenza virus proteins and OVA was most
compatible with OPTIVAX copolymers with slightly higher POE
concentrations (7.5%-10%).
Safety is critical when considering any new injectable vaccine
adjuvant/delivery system, as several compounds can induce an immune response,
but are too toxic either systemically or at the site of injection for use in
humans. For this reasons, Vaxcel has performed the following safety trials on
OPTIVAX:
- Nonionic block copolymers consisting of POE and POP in the same
orientation as OPTIVAX, but with different ratios and/or lower molecular
weight blocks, have been used as wetting agents in a number of consumer
products, such as toothpaste and mouth wash solutions. These products
are considered to be safe and are listed in the National Formulary.
- A toxicology study on the OPTIVAX CRL1005 copolymer was performed by
Pharmakon Research International, Inc., Waverly, Pennsylvania, under
contract with Vaxcel. In this study, no systemic or site of injection
reactions were observed.
- Under contract with Vaxcel, Coming Hazelton, Madison, Wisconsin,
performed a series of general vaccine safety tests in accordance with the
applicable federal regulations on the OPTIVAX CRL1005 copolymer
administered in combination with the (LOGO)hCG-DT immunogen. All OPTIVAX
CRL1005 copolymer formulations "passed" the regulatory general safety
tests.
- A pyrogenicity test was performed by Hazelton on (LOGO)hCG-DT in
combination with the OPTIVAX CRL1005 copolymer and the product was found
to be non-pyrogenic.
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Some potential injectable adjuvant products have appeared to be promising
in laboratory animals, but have not lived up to expectations in humans due to
lack of efficacy or toxicities. For this reason, Vaxcel believed it was
important to attempt to prove that OPTIVAX was safe and adjuvant active in
humans when given by the injectable route. Therefore, an IND was filed with the
FDA in late 1995 and an open-label, dose escalation Phase I clinical trial was
initiated in January 1996 to evaluate the safety and adjuvant activity of the
OPTIVAX CRL1005 copolymer in humans. In this trial, the OPTIVAX CRL1005
copolymer was administered in combination with (LOGO)hCG-DT, an antigen being
developed as an immunotherapeutic vaccine for patients with metastatic cancer.
The (LOGO)hCG-DT vaccine is a very poor immunogen without an adjuvant and
therefore had been tested in prior human trials only in adjuvant supplemented
formulations. The doses of OPTIVAX CRL1005 copolymer evaluated in this trial
were 3 mg, 10 mg, 25 mg, and 75 mg. All patients were scheduled to receive
three doses of the OPTIVAX+(LOGO)hCG-DT vaccine administered at monthly
intervals. The results from this Phase I trial are expected in the first quarter
of 1997.
Vaxcel's Oral Technologies. To date, Vaxcel has been employing OPTIVAX in
the development of injectable vaccines. After consummation of the Merger, Vaxcel
will expand its program by using the Zynaxis proprietary delivery technologies
to develop oral vaccines. Discussed below is a description of this program.
Most currently available vaccines are administered by needle injection to
stimulate the body's immune system by producing circulating antibodies against a
specific disease. Of the 16 vaccines currently in routine use in the United
States, 14 are delivered by the injection route as only polio and typhoid
vaccines are administered orally. Research has led to the increased recognition
that oral immunization is an important alternative to injectable administration
of vaccines, particularly when mucosal immunity is important. Also, oral
immunization has certain advantages over injectable vaccines, including patient
acceptability and ease of administration.
As a result of the Merger, Vaxcel will acquire two different types of oral
vaccine delivery technologies: (i) microencapsulation and (ii) bioadhesives.
Vaxcel believes these oral delivery technologies may have commercial application
for many marketed vaccines currently administered by parenteral injection (e.g.,
influenza and hepatitis B), as well as certain new vaccines under development.
In addition, these technologies can be administered alone or in combination with
other vaccine carriers, delivery systems, and adjuvants.
The PLG microencapsulation technology is based on the use of lactide and
glycolide polymers. The safety of PLG in humans is well recognized as these
polymers are both biocompatible and biodegradable and have been widely used as
synthetic absorbable sutures. The actual microencapsulation process involves the
trapping of an antigen into pockets or cavities formed within the PLG
microspheres during production. When the final vaccine formulation is
administered to humans, the PLG microspheres degrade and the encapsulated
antigen is then released to the appropriate immunological site in the body.
While vaccines encapsulated in PLG microspheres can be administered by
parenteral injection, it is the oral delivery of vaccines using this technology
that may hold the most promise. Vaxcel believes the PLG microspheres may be
ideally suited for oral delivery of vaccines for several reasons. First, the PLG
microspheres appear to protect antigens from degradation during passage through
the acidic environment of the stomach. This property of PLG may allow the
antigen to be appropriately delivered to the Peyer's Patches, which are the
lymphoid tissues of the small intestines. Secondly, microspheres in the 1-10
micron size range can be reproducibly synthesized using PLG and there is certain
scientific evidence that this size range may be ideal for uptake by the Peyer's
Patches. Thirdly, the PLG polymers are hydrophobic, an important property since
hydrophobic materials may be more efficiently taken up through the Peyer's
Patches.
Experimental vaccines encapsulated using PLG have been evaluated in
laboratory animals and non-human primates by academic and industrial scientific
groups. PLG encapsulated vaccines have induced systemic and mucosal antibody
responses following oral administration. They have also induced immune responses
that protected animals from experimental infectious challenge with both
bacterial and viral pathogens, including Helicobactor species (the causative
agent of common peptic ulcers), influenza virus, and simian immunodeficiency
virus. PLG-encapsulated vaccines have been and are continuing to be evaluated in
human clinical trials.
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The second oral vaccine delivery technology Vaxcel will acquire in the
Merger is based on bioadhesives, which are natural or synthetic polymers that
interact with the membrane surfaces of tissues. Bioadhesives that bind to
mucosal tissues or the mucin that coats these tissues are called mucoadhesives.
To date, mucoadhesive polymers have been favorably evaluated by others as
components in oral drug formulations.
The bioadhesive oral vaccine delivery program is predominantly focused on
mucoadhesive polymers. The lead mucoadhesive polymer has been evaluated in a
mouse influenza vaccine model where it was shown to induce a stronger mucosal
immune response following a single oral dose than the injected vaccine. The oral
route was also used as a second vaccination to boost the pre-existing immune
responses induced by either injected or orally administered vaccines. This
second observation supports its potential use in humans where most adults have
pre-existing immunity either from previous vaccines or infection with influenza
virus.
Vaxcel's Business Strategy. Once the Merger is consummated, Vaxcel's
business strategy will be to develop and commercialize its portfolio of
proprietary vaccine adjuvants and delivery systems that can be used in
conjunction with existing vaccines and new vaccines under development. Vaxcel
plans to attempt to license its adjuvant/delivery system technologies on an
antigen-by-antigen basis to pharmaceutical/biotechnology companies engaged in
vaccine research and development. In the short-term, Vaxcel will focus its
licensing efforts on the OPTIVAX injectable delivery technology, because this
technology is more advanced from a development standpoint than the oral delivery
technologies being acquired from Zynaxis. At present, Vaxcel has option
agreements for the development of its OPTIVAX technology with Medeva and
Connaught and a license agreement with Corixa. Also, Vaxcel will acquire in the
Merger a development and licensing agreement with ALK for oral delivery of
bioactive substances for the treatment of allergy. Vaxcel will seek additional
corporate partners for development and commercialization of specific vaccines
incorporating its adjuvant/delivery system technologies. The strategy will be to
build a data package on each of its technologies in order to assure maximum
value under sublicensing agreements with its collaborators. Under such
agreements, sublicensees will combine Vaxcel's technologies with the
sublicensee's vaccines and assume responsibility for product development,
regulatory approval, and marketing at the expense of the sublicensee. In return,
Vaxcel will receive up-front licensing fees, milestone payments, and royalties
on sales. The structure of these arrangements and Vaxcel's responsibilities will
vary depending upon a number of factors, including the identity of Vaxcel's
collaborator, the potential market for the vaccine, and the stage of development
of the vaccine. Vaxcel believes these arrangements will limit its research and
development costs and speed market entry by capitalizing upon the expertise of
its partners.
Current Corporate Collaborations. Once the Merger is consummated, Vaxcel
will have four corporate collaboration agreements for the development of its
technologies:
Connaught. In August 1995, Vaxcel signed an option agreement with
Connaught to evaluate OPTIVAX in combination with a Connaught vaccine being
developed for the prevention of an infectious disease. Connaught, located
in Swiftwater, Pennsylvania, is one of the largest vaccine companies in the
world and offers the broadest range of human vaccines and biologicals
commercially available from any single U.S. company. Connaught is a
subsidiary of Connaught Laboratories Ltd. and a member of the Pasteur
Merieux Serums & Vaccins family of companies.
The option agreement gives Connaught exclusive rights to evaluate
OPTIVAX with a vaccine currently under development at Connaught through
Phase I human clinical trials. Under the terms of this agreement, Vaxcel
received an upfront cash payment and Connaught will assume responsibility
for all preclinical, clinical and regulatory activities. If the Phase I
trials are successful, Connaught will have the right to negotiate an
exclusive license to further develop and market OPTIVAX in the specific
disease field. Under such a licensing arrangement, Vaxcel will receive
further milestone payments, royalties on sales, and payments under a supply
agreement for having OPTIVAX manufactured for Connaught.
Medeva. In October 1995, Vaxcel signed an option agreement with
Medeva to evaluate OPTIVAX in combination with a Medeva viral antigen.
Medeva is a London based pharmaceutical company specializing in the
therapeutic areas of vaccines, respiratory products, and pain management.
Medeva currently markets a variety of important vaccines and is also in
late-stage development of a hepatitis B
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vaccine that may show utility in people for whom existing hepatitis B
vaccines offer limited or no protection.
This agreement gives Medeva rights to evaluate OPTIVAX in combination
with their viral antigen in both preclinical and Phase I human clinical
testing. In return, Vaxcel received an upfront cash payment and will
receive milestone payments for successful product development. In addition,
Medeva will fund product development activities. If the Phase I trials are
successful, Medeva will have the right to negotiate a co-exclusive license
to further develop and market OPTIVAX in the specific disease field. Under
such a licensing arrangement, Vaxcel will receive further milestone
payments, royalties on sales, and payments under a supply agreement for
having OPTIVAX manufactured for Medeva.
Corixa. In April 1996, Vaxcel signed a definitive license agreement
with Corixa for use of Vaxcel's OPTIVAX in combination with vaccines being
developed by Corixa. Corixa, a privately-held Seattle-based biotechnology
company formed in late 1994, is discovering and developing T cell
therapeutic vaccines for the treatment of certain infectious diseases and
cancer.
Under terms of the agreement, Corixa received worldwide, exclusive
rights to use OPTIVAX with a variety of cancer and infectious disease
vaccines being developed by Corixa. Corixa also has the right to sublicense
vaccines containing OPTIVAX. Corixa or its sublicensees will be responsible
for conducting all development, regulatory submissions and marketing
activities for their vaccines combined with OPTIVAX. In return, if vaccines
are successfully developed, Vaxcel will receive milestone payments,
royalties on sales, and payments under a supply agreement for having
OPTIVAX manufactured for Corixa or its sublicenses.
ALK. Vaxcel will assume an agreement with ALK in the Merger. ALK is a
world leader in the preparation and standardization of allergen extracts
for allergy immunotherapy. In September 1995, ALK executed a development
and licensing agreement under which Zynaxis granted ALK exclusive,
worldwide rights to evaluate and develop Zynaxis' oral technologies for
delivery of bioactive substances for the treatment of allergy.
Prior to the Merger, Zynaxis received four quarterly payments from ALK
totaling $1,000,000. Once the Merger is consummated, Vaxcel may receive
additional milestone and royalty payments from ALK if ALK receives FDA or
certain other regulatory approvals for allergy products using the Zynaxis
vaccine delivery technologies. Under the terms of this agreement, ALK is
responsible for conducting all development, regulatory submissions and
marketing activities for ALK's allergy products using the Zynaxis
technologies. In addition, ALK has the right to make or have made the PLG
microspheres.
In addition to the above mentioned corporate collaborations, Vaxcel has
several research and materials transfer agreements with leading vaccine
manufacturers and biotechnology companies whereby Vaxcel has provided its
adjuvant/delivery system technology for evaluation with their antigens. Under
other arrangements, some companies have provided Vaxcel with their antigens to
be tested in conjunction with Vaxcel's adjuvant/delivery system technology.
Assuming successful results from such evaluations, Vaxcel intends to pursue
sublicensing agreements or other arrangements with certain of these research
partners.
Product Development Activities. Discussed below is the current status of
two product development programs Vaxcel will have after the Merger is
consummated:
Influenza Products. Pursuant to an agreement with a corporate
collaborator, the collaborator is attempting to develop an
OPTIVAX-adjuvanted influenza virus vaccine. The influenza virus (commonly
referred to as the "flu") is a significant health care problem almost every
year, infecting about 20% of the global population. In an average year in
the United States, influenza and its complications account for 20,000
deaths (most notably in the elderly), 10-15 million patient visits to
physicians, 600,000 or more hospitalizations, over 15 million days of lost
work, and almost $10 billion in total direct health care costs. Some
experts estimate that influenza causes more deaths and direct health care
expenditures than acquired immune deficiency syndrome ("AIDS").
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At present, there is no effective therapy for influenza and vaccines
are used to help prevent the incidence of the disease. The influenza
vaccines that are administered in the United States may vary each year and
their composition is determined by the CDC and others based on the types of
viruses expected to be prevalent during the upcoming influenza season.
The annual volume for flu vaccines in the United States has grown from
about 20,000,000 doses in 1991 to over 70,000,000 doses today. A similar
growth pattern has occurred in Western Europe. This strong growth has
occurred even though: (a) currently marketed vaccines are only 30-80%
effective in preventing influenza depending upon the age of the vaccinee
(efficacy is generally lower in the elderly); (b) no new influenza vaccine
has been developed in years; (c) compliance to annual immunizations is low
even among high risk groups, despite strong recommendations to vaccinate by
organizations such as the CDC; and (d) no major promotional effort has been
initiated by marketers of flu vaccines for several years.
Currently marketed influenza vaccines are considered to be highly cost
effective despite their reduced efficacy. A 1994 large scale health
maintenance organization study demonstrated a direct cost savings of
approximately $117 per person vaccinated.
Current vaccines have reached the limit of their potency and
conventional approaches to improve efficacy, such as formulating with
aluminium salts ("alum"), have failed to increase potency. In preclinical
studies conducted by Vaxcel and a corporate collaborator, an OPTIVAX
adjuvanted influenza vaccine increased the levels of antibodies specific
for total virus preparations and HAI antibody responses versus the
collaborator's influenza vaccine alone or supplemented with alum.
Allergy Products. Most individuals respond to pollens, animal
proteins, or other environmental substances in a controlled fashion. In
individuals who are allergic, the immune system responds inappropriately,
resulting in congestion, allergic rhinitis and other symptoms. In severe
cases, allergic reactions can include anaphylaxis and systemic shock.
It is estimated that there are forty million individuals in the United
States suffering from various allergies. The most common allergies are to
grass pollens, ragweed, house dust mites, and cat dander. Steroids,
antihistamines, decongestants, and cough syrups are used to treat allergy
associated symptoms, but can cause substantial side effects and do not
effect the underlying immune response. Approximately one to three million
people who suffer severe or debilitating allergies are treated using
immunotherapy. This typically requires weekly or monthly injections with
allergen extracts over prolonged time periods, sometimes as long as several
years.
The allergy products being developed by a collaborator using the
Zynaxis technologies may provide effective therapy in a convenient oral
formulation. These products may increase the size of the allergy
immunotherapy market by offering a more patient-friendly alternative to
routine injections.
At present, ALK is performing a Phase II human clinical trial with the
PLG microencapsulation technology.
Marketing and Sales. If Vaxcel obtains approval for commercialization of
vaccines using its vaccine adjuvant/delivery system technologies, Vaxcel intends
to market and sell such products directly through its collaborators. Pediatric
vaccines are sold and distributed in the United States directly to private
practicing physicians (primarily pediatricians and generalists), pharmacies,
surgical supply dealers, and government agencies such as the CDC, the military,
and city, county and state health departments. For pediatric vaccines
recommended for routine use in children, approximately 50% of the doses are
distributed through the private sector and 50% through the public sector. Adult
vaccines are sold through the same channels, except with minimal pediatrician
and less extensive public sector involvement. The United States government
negotiates annual contracts for vaccines to be used in the public health sector.
These contracts are awarded based on price, ability to supply and product
innovation. Prices in the public sector are generally lower than those in the
private sector.
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Because of well-documented reports on the cost-effectiveness of vaccines,
some managed health care organizations have initiated programs to increase the
immunization rates of their members. Other groups have implemented creative
programs, including incentives, to accomplish this goal. Vaxcel believes that
these programs will result in an increased demand for vaccines in the future.
Patents and Proprietary Technology. Vaxcel actively seeks patent
protection for its technologies, processes, uses, and ongoing improvements and
considers its patents and other intellectual property to be critical to its
business.
Vaxcel has received a worldwide, exclusive license from CytRx for the use
of a series of certain copolymers as a vaccine adjuvants/delivery system. See
"-- Certain Transactions." The patent rights obtained by Vaxcel under the
agreement include three patents and patent applications in the United States and
selected foreign countries including, but not limited to, Japan, Canada, Israel,
Australia, China and the European Patent Office. These patents and patent
applications contain claims directed to the use of copolymers as vaccine
adjuvants/delivery systems and the use of the copolymers in any vaccine
preparation. The patent applications also cover novel copolymers, including the
composition of the OPTIVAX CRL1005 copolymer currently being developed by
Vaxcel. The patent applications also contain composition of matter claims for
certain vaccine delivery systems and vaccine formulations which contain
copolymers.
The compositions and methods for the administration of bioactive agents to
and through the Peyer's Patches by means of microencapsulation in biocompatible,
biodegradable microspheres of 1-10 microns in diameter are protected by issued
patents, pending United States patent applications, and foreign counterparts
held by SRI and UAB. By means of the Merger with Zynaxis, this
microencapsulation technology will be exclusively licensed to Vaxcel in the
field of oral vaccine delivery. See "-- Certain Transactions."
The European patent on the PLG microencapsulation technology is currently
being challenged by certain third parties and is the subject of an opposition
hearing. Based on the opinions of certain patent counsel, Vaxcel is optimistic
that the challenge by third parties will be unsuccessful and the patent will be
upheld.
Through the Merger, Vaxcel will also acquire rights to pending United
States patent applications and foreign counterparts relating to the use of
polymeric mucoadhesives for the oral delivery of vaccines at mucosal surfaces
and compositions and methods for preparation of solid, orally administered
dosage units for live viral vaccines.
Vaxcel continually evaluates the patentability of new inventions and
improvements developed by its employees and collaborators. Whenever appropriate,
Vaxcel will endeavor to file United States and international patent applications
to protect these new inventions and improvements. However, there can be no
assurance that any of the current pending patent applications or any new patent
applications that may be filed will result in issued United States or foreign
patents.
Vaxcel also attempts to protect its proprietary products, processes and
other information by relying on trade secrets and non-disclosure agreements with
its employees, consultants and certain other persons who have access to such
products, processes and information. Under the agreements, all inventions
conceived by employees are the exclusive property of Vaxcel. Nevertheless, there
can be no assurance that these agreements will afford significant protection
against misappropriation or unauthorized disclosure of Vaxcel's trade secrets
and confidential information.
Government Regulation. The manufacture and sale of any product based on
Vaxcel's proprietary injectable and oral vaccine adjuvants and delivery systems
is subject to extensive regulation by United States and foreign governmental
authorities. In particular, vaccines and vaccine delivery systems are subject to
rigorous preclinical and clinical testing and other approval requirements by the
FDA in the United States under the federal Food, Drug and Cosmetics Act and by
comparable agencies in most foreign countries.
As an initial step in the FDA regulatory approval process, preclinical
studies are typically conducted in animals to assess safety and efficacy. For
certain diseases, animal models exist which are believed to be predictive of
human efficacy, and the vaccine candidate is tested in such animal models. For
other diseases for which no animal model exists, the testing of a vaccine may
proceed to human trials, provided that preclinical
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testing in animals establishes the safety of the vaccine and suggests a
relationship of the vaccine to the human immune response.
After preclinical studies are completed, an IND must be submitted to the
FDA which contains, among other things, data regarding the results of all
preclinical studies, detailed characteristics of the vaccine (for example,
stability and chemical structure), methods of manufacturing and a detailed
description of the intended clinical trials. The data must be reviewed and
approved by the FDA prior to the initiation of clinical trials.
Clinical trials are typically conducted in three sequential phases,
although the phases may overlap. In Phase I, which frequently begins with the
introduction of the vaccine into healthy adult humans, the vaccine will be
tested for safety and, if possible, to gain early information on effectiveness.
Phase II typically involves studies in a small sample of the intended population
to assess the safety and efficacy of the vaccine and to determine the
appropriate dosing regimen. Phase III trials are undertaken in an expanded
target population at geographically dispersed study sites in order to confirm
safety and efficacy, determine the overall risk/benefit ratio of the vaccine,
and provide an adequate basis for physician labeling. Each trial is conducted in
accordance with certain standards under protocols that detail the objectives of
the study, the parameters to be used to monitor safety and the efficacy criteria
to be evaluated. Each protocol must be submitted to the FDA as part of the IND.
Furthermore, each clinical study must be evaluated by an independent
Institutional Review Board ("IRB") at the institution at which the study will be
conducted. The IRB will consider, among other things, ethical factors, the
safety of human subjects and the possible liability of the institution.
The clinical trial requirements for FDA approval of an improved version of
a vaccine that is already on the market may differ from the requirements for a
new vaccine. For a new vaccine, a company must demonstrate in clinical trials
that the vaccine actually reduces the incidence of disease in healthy
individuals and that a certain antibody level has been achieved. This process of
establishing a clinical correlate usually takes place during Phase III trials,
can take two or more years to complete and can be extremely costly. Therefore,
the FDA approval process for a new vaccine from Phase I to commercialization can
take seven or more years. For certain improved versions of an existing vaccine,
however, the company may be required to demonstrate only that the vaccine
induces equal or greater antibody levels as compared to the original version of
the vaccine. Therefore, lengthy and costly clinical trials might be avoided for
these vaccine improvements, and the amount of time required to commercialize a
product might be reduced significantly.
Data from preclinical testing, clinical trials, and related information on
a vaccine are submitted to the FDA in a Product License Application ("PLA") for
marketing approval. The process of completing clinical testing and obtaining FDA
approval for a new vaccine is likely to take a number of years and require the
expenditure of substantial resources. Preparing a PLA involves considerable data
collection, verification, analysis and expense, and there can be no assurance
that any approval will be granted on a timely basis, if at all. The approval
process is affected by a number of factors, including the severity of the
disease, the availability of alternative treatments and the risks and benefits
demonstrated in clinical trials. The FDA may deny a PLA if applicable regulatory
criteria are not satisfied, or it may require additional testing or information.
Among the conditions for marketing approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
to the FDA's GMP regulations, which must be followed at all times. In complying
with standards set forth in these regulations, manufacturers must continue to
expend time, money and effort in the area of production and quality control to
ensure full technical compliance. Manufacturing establishments, both foreign and
domestic, also are subject to inspections by or under the authority of the FDA
and by other federal, state or local agencies. In addition, manufacturers of
certain vaccines must submit a sample of each vaccine batch to the FDA.
Manufacturers of all vaccines must submit internal testing data for each batch.
For certain vaccines, the FDA is required to release each batch for commercial
sale which may involve additional testing by the FDA of the particular batch.
Pursuant to the Prescription Drug User Fee Act of 1992, pharmaceutical
manufacturers now will be required to pay three types of user fees: (i) a
one-time application fee for a prescription New Drug Application ("NDA") or PLA;
(ii) an annual product fee imposed on prescription drug products after FDA
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approval; and (iii) an annual establishment fee imposed on facilities used to
manufacture prescription drugs. Vaxcel estimates that its fees for the original
submission of a NDA or PLA involving clinical data could range up to $233,000
over the next five years, and annual establishment fees could range up to
$138,000; annual product fees will be less significant, but will be required for
each specific strength or potency of the marketed drug. Although there are
exemptions for certain products, and deferrals of payment and significant
discounts for small businesses, it still is uncertain how the FDA will interpret
and apply these provisions of the legislation.
Even if a license to manufacture the vaccine has been obtained, further
studies, including post-marketing studies, may be required to provide additional
data on safety. Results of post-marketing programs may limit or expand the
further marketing of the products. Further, if there are any modifications to
the vaccine, including changes in indication, manufacturing process, labeling,
or a change in manufacturing facility, a PLA supplement may be required to be
submitted to the FDA. If the FDA has reasonable grounds to believe that a
vaccine presents a danger to health, and the regulatory grounds for license
revocation are met, the FDA may suspend a product license.
Whether or not FDA approval has been obtained, approval of a product by
regulatory authorities in foreign countries must be obtained prior to the
commencement of commercial sales of the product in such countries. The
requirements governing the conduct of clinical trials and product approvals vary
widely from country to country, and the time required for approval may be longer
or shorter than that required for FDA approval. Although there are some
procedures for unified filings for certain European countries, in general each
country at this time has its own procedures and requirements.
Competition. Given the attractiveness of the vaccine market in terms of
sales potential, the number of biotechnology and large pharmaceutical companies
that are engaged in vaccine research and development has increased dramatically
over the past decade. In addition, Vaxcel is aware of significant vaccine
research and development activities at certain major universities and research
institutions. Consequently, competition is quite intense.
The field of vaccine adjuvants/delivery systems has emerged in recent years
as immunologists have recognized the need for technologies capable of generating
potent immune responses. At present, the only adjuvant used in licensed human
vaccines is alum. While alum has been sufficient to augment human immunological
responses to certain potent antigens, alum is not effective with the new
generation of highly purified subunit vaccines under development which are
inherently less potent. In addition, alum has been evaluated with currently
marketed influenza vaccines in human clinical trials with unfavorable results.
A number of companies are attempting to develop new injectable and oral
vaccine adjuvants/delivery systems and some have already licensed their
technologies to large pharmaceutical and/or biotechnology companies for the
development of certain vaccines. Vaxcel believes its major competitors in the
vaccine adjuvant/delivery field are: (i) Adjumer, Micromer, and VibrioVec
adjuvants/delivery systems by Virus Research Institute, Inc.; (ii) QS-21 by
Aquila Biopharm; (iii) MF59 by Chiron Biocine; (iv) MPL by Ribi Immunochem
Research, Inc., (v) ISCOMs by Isotec AB/CSL Limited; and (vi) liposomes by
multiple developers. After showing promising results in early development, some
of these competitive technologies have experienced problems (formulation
difficulties, systemic or site of injection toxicities, etc.) when subjected to
more extensive preclinical or clinical testing. These problems may limit the
usefulness of some of these competitive adjuvants/delivery systems.
Regarding product development, Vaxcel is aware of competitors who are
attempting to develop improved influenza virus vaccines based on recombinant
antigens, injectable adjuvants, oral delivery systems, and intranasal
administration of attenuated strains, some of which are currently being
evaluated in human studies. Vaxcel and its corporate partner believe that the
OPTIVAX formulated influenza virus vaccine can effectively compete against these
alternative approaches based on the ease of formulation, safety, efficacy, and
development timetable of this formulation. In addition, Vaxcel will likely seek
additional corporate partners to develop oral influenza virus vaccines using the
acquired PLG microsphere and mucoadhesive technologies.
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The primary competitor in the allergy immunotherapy market is Immunologic,
a company developing peptide-based injectable products for cat dander, ragweed,
and other common allergies, some of which are in clinical development. Because
of the efficacy, ease of administration, and improved patient acceptance of the
oral allergy formulations being developing using the PLG technology, Vaxcel
believes these formulations will effectively compete with Immunologic's
peptide-based injectable products.
Manufacturing. Vaxcel currently does not have the capabilities to
manufacture any of its vaccine delivery/adjuvant technologies and plans to rely
upon collaborators and/or contract manufacturers to produce both its
technologies and final vaccine products for preclinical, clinical, and
commercial purposes.
Vaxcel is required to purchase its requirements for bulk OPTIVAX copolymers
from CytRx or CytRx's designated third party contract manufacturer under the
terms of a supply agreement between Vaxcel and CytRx. See "-- Certain
Transactions." To date, Vaxcel has been contracting with CytRx to synthesize and
supply the bulk OPTIVAX copolymers under GMP conditions for both preclinical and
clinical purposes. Vaxcel believes that the manufacturing process used by CytRx
for the OPTIVAX copolymers currently under development can be readily scaled up
to permit bulk manufacture in commercial quantities by either CytRx or CytRx's
designated third-party contract manufacturer. After the bulk OPTIVAX copolymers
are supplied to Vaxcel by CytRx, Vaxcel plans to send this bulk material to
sublicensees at prices per kilogram which have been predetermined in a supply
agreement between Vaxcel and the sublicensee. The sublicensees will be
responsible for bulk manufacture of the antigen and for formulation of the final
vaccine product.
Upon consummation of the Merger, Vaxcel will have no internal manufacturing
capabilities and no written agreement with a contract manufacturer for
production of the PLG microencapsulation technology. The PLG microspheres
currently being used in the ALK Phase II clinical trial were produced by SRI,
one of the original patent holders for the technology. In the near future,
Vaxcel will continue to rely on contract manufacturers, including SRI, for
supplying PLG microspheres for both preclinical studies and clinical trials of
the technology. Vaxcel believes that there are several third-party contract
manufacturers which could produce the PLG technology under GMP conditions and
Vaxcel will seek to identify and negotiate a written supply agreement with such
a supplier. In addition, under the terms of the license agreement for the
technology with SRI and UAB, Vaxcel will have the right to transfer the know-how
for manufacturing the PLG microspheres to its sublicenses and Vaxcel may employ
this strategy with certain sublicenses.
Upon consummation of the Merger,Vaxcel will have no capabilities of
internally or externally manufacturing the mucoadhesive technology in accordance
with GMP conditions. To date, mucoadhesives have been produced at the laboratory
level in order to conduct preclinical studies. Assuming preclinical studies
continue to be positive, Vaxcel will seek a third-party contract manufacturer to
produce mucoadhesives for further development and clinical testing and Vaxcel
will attempt to negotiate a written supply agreement with such a manufacturer.
Vaxcel believes the mucoadhesives can be produced at commercial scale under GMP
conditions since this technology has been manufactured by others as components
in oral drug formulations.
CERTAIN TRANSACTIONS
Vaxcel derives its rights to develop and commercialize OPTIVAX from a
license agreement with CytRx effective January 1993, as amended (the "OPTIVAX
Agreement"), which grants to Vaxcel the exclusive, worldwide right to develop
and sell certain copolymers covered by claims of certain United States and
foreign patent rights of CytRx, for use to enhance immune response in humans, in
combination with an antigen in a vaccine delivery system (the "OPTIVAX Field").
Expressly excluded from the OPTIVAX Field are use of the copolymers alone as
non-specific immune stimulants and use of the copolymers as therapeutic agents
for infectious diseases. Under the terms of the OPTIVAX Agreement, Vaxcel is
required to pay CytRx a 10% royalty on net sales by Vaxcel or its affiliates of
vaccines directly commercialized by Vaxcel in the OPTIVAX Field for the longer
of ten years from the first commercial sale of the product or the life of any
patent right covering the licensed product. CytRx has licensed certain of its
technology from Emory University and BASF Corporation. CytRx has agreed to pay
royalty owed to Emory University or BASF Corporation, if any, as a result of
Vaxcel's commercialization of licensed products. Vaxcel is responsible for all
other third-party royalties resulting from its activities under the OPTIVAX
Agreement. The OPTIVAX Agreement gives
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Vaxcel the right to sublicense its rights, subject to certain conditions and the
payment to CytRx of 15% of the sublicense compensation received by Vaxcel.
CytRx has the right to an exclusive license of any improvements made by
Vaxcel relating to the licensed products, to the extent such improvements fall
outside of the OPTIVAX Field, on terms that would be no less favorable to CytRx
than those included in the OPTIVAX Agreement. Vaxcel has the exclusive right and
title to any improvements made by Vaxcel within the OPTIVAX Field. Vaxcel has
agreed, during the term of the OPTIVAX Agreement and for a period of five years
thereafter, not to develop or commercialize any product that competes with the
development and commercialization activities of CytRx related to surfactant,
surfactant-like and glycosaminoglycan molecules and derivatives. CytRx has
agreed, during the term of the OPTIVAX Agreement, not to develop or sell any
product that consists of polyoxyethylene/polyoxypropylene copolymer in the
OPTIVAX Field. If CytRx discovers a copolymer that has a potential use in the
OPTIVAX Field that it has elected not to develop for any use, CytRx is required
to offer the copolymer to Vaxcel for licensing on substantially the same terms
as the OPTIVAX Agreement.
The OPTIVAX Agreement may be terminated by CytRx under certain customary
circumstances (such as breach of the OPTIVAX Agreement by Vaxcel) and also may
be terminated by CytRx under the following circumstances: (i) Vaxcel fails to
use its best efforts to file a PLA with the FDA by January 1, 2000, for a
product not requiring full-scale efficacy trials; or (ii) Vaxcel fails to use
its best efforts to make any commercial sales of a licensed product in the
United States, Japan or Europe by January 1, 2001. The OPTIVAX Agreement may be
terminated by Vaxcel at any time upon sixty days' notice following breach of the
agreement by CytRx.
The OPTIVAX Agreement gives Vaxcel the right to make finished vaccines but
does not provide the right to make the bulk copolymers, which are supplied by
CytRx under a supply agreement entered into between Vaxcel and CytRx effective
January 1993 and amended as of October 10, 1997 (the "Supply Agreement"). Under
the terms of the Supply Agreement, CytRx is to provide the OPTIVAX CRL1005
copolymer at prices per kilogram which have been predetermined in the Supply
Agreement. If Vaxcel requests CytRx to synthesize and supply a copolymer
different than the OPTIVAX CRL1005 copolymer, CytRx will offer to supply such
copolymers to Vaxcel upon terms similar to the OPTIVAX CRL1005 copolymer if such
copolymer is similar in structure and requires similar manufacturing procedures
with similar cost. In the event the cost of CytRx supplying such copolymers to
Vaxcel is not similar to the OPTIVAX CRL1005 copolymer or involves other
manufacturing processes, the parties will negotiate revised prices per kilogram
and all other terms of the Supply Agreement will remain unchanged. Vaxcel's
requirements of the copolymers are to be provided either directly by CytRx or
through a third-party supplier selected by CytRx. If CytRx or its licensed
third-party chemical manufacturer is unwilling or unable to supply the
copolymers, then Vaxcel and/or its sublicensees shall have the right to make or
have made the copolymers and CytRx will make appropriate manufacturing know-how
available to Vaxcel or its designee. The Supply Agreement is subject to
termination by CytRx upon a termination event under the OPTIVAX Agreement and in
other customary circumstances (such as a breach by Vaxcel).
Upon consummation of the Merger, Vaxcel will acquire rights to the PLG
microencapsulation technology. The rights to develop, commercialize, and
sublicense the PLG microencapsulation technology is based on the terms of the
PLG Agreement, effective July 1987, in the field of oral vaccine delivery with
SRI and UAB. The PLG Agreement will grant Vaxcel the right to make, have made,
use, sell, and sublicense (with the consent of SRI and UAB) the oral PLG
technology. Expressly excluded from the PLG Agreement are use of the PLG
technology for vaccines administered via injection; non-vaccine drugs,
nutrients, proteins, and peptides; and enterically coated antigens. Under the
terms of the PLG Agreement, Vaxcel will be required to pay SRI and UAB: (i) an
annual minimum fee of $80,000 in 1997, which shall increase by $10,000 per year
from 1998 through 2002; (ii) 3.5% of net sales if ALK generates any product
sales using the microencapsulation technology; and (iii) 6% of net sales for the
life of the patent or patents or 5% of net sales for 15 years after the
effective date of the PLG Agreement should a patent or patents fail to issue or
be invalidated if third parties other than ALK generate any product sales using
the microencapsulation technology.
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The PLG Agreement may be terminated by SRI and UAB under certain customary
circumstances (such as breach of the agreement by Vaxcel) and also may be
terminated by SRI and UAB under the following circumstances after the
consummation of the Merger: (i) Vaxcel discontinues the business of developing,
making, or selling (directly and through sublicensees) the PLG technology for
more than 90 consecutive days; or (ii) Vaxcel becomes insolvent or declares
bankruptcy. After the Merger, the PLG Agreement may be terminated by Vaxcel at
any time upon giving 90 days' notice to SRI and UAB.
Effective June 1, 1993 and amended October 10, 1996, Vaxcel and CytRx
entered into a services and facilities use agreement pursuant to which CytRx
agreed to provide Vaxcel with certain management, administrative, and scientific
services, as well as the use of certain administrative space at the CytRx
facility in Norcross, Georgia. CytRx has made available to Vaxcel certain
employees at various hourly rates based on salary plus overhead factors. Vaxcel
has no obligation to use any employees from CytRx, except in relation to the
supply of OPTIVAX copolymers, for any period during the agreement. For certain
administrative office space, Vaxcel will pay CytRx a monthly fee of $15 per
square foot of space used by Vaxcel. This fee paid by Vaxcel to CytRx includes
basic office furniture, utilities, taxes, general management and maintenance,
basic phone service, and reasonable usage of copy machines, office supplies,
postage, conference rooms, and other common areas. Pursuant to the services and
facilities agreement, out-of-pocket expenditures for such items as long distance
telephone, office equipment, large office supplies are paid directly by Vaxcel.
The agreement continues in force unless terminated by either party. At any time,
the agreement may be terminated by either party upon eight months' notice.
Effective January 1, 1996 and amended October 16, 1996, Vaxcel and
Proceutics entered into a facilities use agreement whereby Proceutics has
reserved and made available to Vaxcel approximately two-thirds of its vivarium
facility, together with the necessary support functions, and a 570 square foot
laboratory. Under the services and facilities agreement, for use of the vivarium
space, Vaxcel will pay Proceutics a monthly fee of $2,000 for the balance of
1996 and $3,250 for 1997, and for use of the laboratory space, Vaxcel will pay
Proceutics a monthly fee of $1,425 in 1996. Such fees will increase or decrease
annually on January 1 based on changes in the Producer Price Index. Upon three
months' written notice to Proceutics, Vaxcel may occupy less space in the
vivarium, with a corresponding reduction in monthly fees, if Vaxcel's planned
volume of experiments decreases. These fees paid by Vaxcel to Proceutics include
all utilities, taxes, maintenance, basic phone service, veterinarian services,
and reasonable usage of copy machines, warehouse, conference rooms and other
common areas. Vaxcel is responsible for all direct costs associated with animal
care and experiments in this facility. The agreement continues in force unless
terminated by either party. At any time, the agreement may be terminated by
either party upon 12 months' notice.
FACILITIES AND EMPLOYEES
In total, Vaxcel leases approximately 2,500 square feet of space within the
CytRx and Proceutics Norcross, Georgia complex. Vaxcel believes that these
facilities are sufficient for its needs for the near future.
At present, Vaxcel has a staff of six individuals dedicated to the
development of its vaccine adjuvant/ delivery system technologies, two of whom
are Ph.D.s. None of Vaxcel's employees is represented by a labor union. Vaxcel
believes that its employee relations are good.
Effective June 1, 1993, and amended October 10, 1996, Vaxcel and CytRx
entered into a services agreement pursuant to which CytRx agreed to provide
Vaxcel with certain management, administrative, and scientific services. CytRx
has made available to Vaxcel certain employees at various hourly rates based on
salary plus overhead factors. Vaxcel has no obligation to use any employees from
CytRx, except in relation to the supply of OPTIVAX copolymers, for any period
during the agreement. At any time, the agreement may be terminated by either
party upon eight months notice. See "Business of Vaxcel -- Certain
Transactions."
A supply agreement has also been executed for CytRx to manufacture and
supply GMP copolymer for Vaxcel's development and commercial requirements for
OPTIVAX. See "Business of Vaxcel -- Certain Transactions".
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<PAGE> 90
PROPERTIES
From January 1994 to August 1995, Vaxcel occupied administrative offices
and laboratories in a separate facility in Norcross, Georgia under a five-year
lease agreement. In August 1995, Vaxcel relocated its administrative offices and
laboratories to the CytRx and Proceutics complex in Norcross and subleased its
prior facility to SeaLite Sciences, Inc. commencing January 23, 1996. This
sublease agreement will remain in effect until January 22, 1999. The rental
income received by Vaxcel under this sublease agreement with SeaLite Sciences,
Inc. approximates Vaxcel's costs under the original lease agreement.
LEGAL PROCEEDINGS
Vaxcel is not a party to any legal proceedings.
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<PAGE> 91
MANAGEMENT OF VAXCEL
DIRECTORS AND EXECUTIVE OFFICERS
Vaxcel's directors and executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
--------------------------------------- --- ---------------------------------------
<S> <C> <C>
Paul J. Wilson......................... 44 President and Chief Executive Officer
Jack J. Luchese........................ 47 Chairman(1)
Jack L. Bowman......................... 63 Director(1)
Raymond C. Carnahan, Jr................ 70 Director(1)
Herbert H. McDade, Jr.................. 69 Director(1)
Mark J. Newman......................... 41 Vice President, Research & Development
Mark W. Reynolds....................... 35 Chief Financial Officer and Secretary
</TABLE>
- ---------------
(1) Each Director holds office until his or her successor is elected and
qualified or until his or her earlier resignation or removal.
Mr. Wilson has served as President, Chief Executive Officer and a Director
of Vaxcel since August 1993. Prior to joining Vaxcel, Mr. Wilson was employed by
American Cyanamid (now part of American Home Products) from November 1974 to
August 1993. From 1992 to August 1993, Mr. Wilson served as Vice President and
General Manager of American Cyanamid's Lederle-Praxis Vaccine Division. In this
position, he had worldwide responsibility for sales, earnings, marketing, market
research, manufacturing, and quality control for Lederle-Praxis' complete line
of vaccine products. In other recent positions at American Cyanamid, Mr. Wilson
was Vice President of Marketing for Lederle Laboratories from 1991 to 1992,
where he had full marketing responsibility for Lederle Laboratories' United
States pharmaceuticals business. Prior to that, he was General Manager for
Lederle International's Canadian operations from 1988 to 1991. Throughout his
career, Mr. Wilson has held similar increasingly responsible positions in sales,
market research, marketing, and commercial operations. In various management and
marketing capacities during his career, Mr. Wilson has commercialized eight new
pharmaceutical products in both the United States and Canada, four of which were
vaccines.
Mr. Luchese has been a Director of Vaxcel since its inception in January
1993 and the Chairman of the Board since October 1993. From January 1993 to
August 1993, Mr. Luchese served as President and Chief Executive Officer of
Vaxcel. Mr. Luchese has been President and Chief Executive Officer of CytRx
since March 1989 and became Chairman of the Board in June 1995. Prior to joining
CytRx, Mr. Luchese served as Vice President and General Manager of the Armour
Pharmaceutical Corporation, and as Vice President, Corporate Business
Development and a member of the Management Committee of Rorer Group, Inc. (now
Rhone-Poulenc Rorer). Prior to joining Rorer Group, Inc., Mr. Luchese was with
Johnson & Johnson Company for 15 years where he held various positions in
business development, licensing, sales, new products marketing, and finance. Mr.
Luchese also serves as a director of Proceutics, Inc. and Vetlife, Inc., wholly
owned subsidiaries of CytRx.
Mr. Bowman has been a Director of Vaxcel since October 1993. Prior to his
retirement at the end of 1993, Mr. Bowman was Company Group Chairman at Johnson
& Johnson Company, a position he held from 1987. From 1991 to 1993, Mr. Bowman
was responsible for Johnson & Johnson Company's diagnostic, blood glucose
monitoring, and certain over-the-counter pharmaceutical businesses. Prior to
that assignment at Johnson & Johnson, he was responsible for a major portion of
Johnson & Johnson's global pharmaceutical businesses. From 1983 to 1987, he was
Executive Vice President of American Cyanamid Company where he was responsible
for the pharmaceutical, medical device, and over-the-counter and toiletry
businesses. Mr. Bowman has also served as President, Lederle Laboratories
Division and Executive Vice President, CIBA-GEIGY Pharmaceutical Division. Mr.
Bowman serves as a director of CytRx, NeoRx Corporation,
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<PAGE> 92
Pharmagenics, Inc., Cell Therapeutics, Inc. and Coating Technologies
International. He also is a director of Proceutics, Inc. and Vetlife, Inc., two
wholly owned subsidiaries of CytRx and is a former member of the Johns Hopkins
University Board of Trustees.
Mr. Carnahan has been a Director of Vaxcel since March 1996. Mr. Carnahan
has over 39 years experience in cost controls and operational systems in a
variety of industries. Prior to his retirement in 1991, Mr. Carnahan served as
Manager, International Cost Analysis planning for Johnson & Johnson
International from 1974 to 1991. Mr. Carnahan is an arbitrator for the American
Arbitration Association and has provided consulting services to
Waterford-Wedgewood Corporation in England and to Torf Pharmaceutical
Corporation in Portland. Mr. Carnahan also serves as Treasurer for the
Morristown Memorial Hospital Chaplaincy Service in Morristown, New Jersey, and
is a director of CytRx. He also is a director of Proceutics, Inc. and Vetlife,
Inc., two wholly owned subsidiaries of CytRx.
Mr. McDade has been a Director of Vaxcel since March 1996. From 1989 to
1996, Mr. McDade was Chairman, President, and Chief Executive Officer of Chemex
Pharmaceuticals, Inc., becoming Chairman of Access Pharmaceutical Co. (the
successor corporation to Chemex) in January 1996. From 1986 to 1989, he was
Chairman and President of Armour Pharmaceutical Corporation, a wholly owned
subsidiary of Rorer Group, Inc. (now Rhone-Poulenc Rorer). Prior to 1986, Mr.
McDade served as Vice President of the Revlon Corporation. Mr. McDade also
serves as a director of CytRx and is a member of the Board of Trustees of Thomas
Acquinas College. He also is a director of Proceutics, Inc. and Vetlife, Inc.,
two wholly owned subsidiaries of CytRx.
Dr. Newman has served as Vice President, Research and Development of
Vaxcel, Inc. since January 1995. In this position, Dr. Newman is responsible for
all aspects of Vaxcel's research and development efforts. Prior to joining
Vaxcel, Dr. Newman was Associate Vice President, Research and Development, for
Apollon, Inc. during 1994 where he was responsible for developing DNA-based
vaccines. Prior to that, he was Director, Immunology and Virology Section and
Senior Director, Clinical Research, at the Biopharmaceuticals Division of
Cambridge Biotech Corporation (now called Aquila Biopharm) from 1989 to 1993. At
Cambridge, he was heavily involved with the development and clinical testing of
the QS21 saponin adjuvant for use with subunit vaccines. During his career, Dr.
Newman has received numerous grants from the National Institutes of Health and
over 50 articles written or co-authored by Dr. Newman have been published in
scientific journals. In addition, he has been involved with several new vaccine
review articles and book chapters. Recently, Dr. Newman co-edited a 900+ page
book entitled Vaccine Design: The Subunit and Adjuvant Approach.
Mr. Reynolds has been Chief Financial Officer and Secretary of Vaxcel since
November 1996, prior to which time he served as Controller and Assistant
Secretary. Mr. Reynolds is concurrently serving as Chief Financial Officer and
Secretary of CytRx. Prior to his joining CytRx in 1988, Mr. Reynolds was
employed as a certified public accountant with Arthur Andersen LLP.
DIRECTOR COMPENSATION
Directors who are employees of Vaxcel ("Employee Directors") or of CytRx
("Affiliate Employee Directors") do not currently receive any compensation for
their services as members of the Board of Directors of Vaxcel. Directors who are
also non-employee Directors of CytRx ("Affiliate Directors") currently receive
$3,000 for each two-day Board meeting cycle of CytRx and its subsidiaries
attended. These fees, and any travel-related costs incurred by Affiliate
Directors, are allocated among CytRx and its subsidiaries on a pro rata basis.
There are currently no Directors who are neither Employee Directors, Affiliate
Employee Directors, or Affiliate Directors ("Outside Directors"). Vaxcel expects
that, subsequent to the Merger, there will be one or more Outside Directors on
its Board. There are currently no established committees of the Board. Upon
consummation of the Merger, Vaxcel will establish an Audit Committee and a
Compensation Committee of the Board.
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<PAGE> 93
All Directors, except Employee Directors, each receive an option to
purchase 5,000 shares of Vaxcel Common Stock upon joining the Board, and each
will receive 2,500 stock options each year thereafter upon their re-election to
the Board.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table provides certain summary information concerning the
compensation earned for services rendered in all capacities to Vaxcel by the
executive officers of Vaxcel.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ------------
SECURITIES
UNDERLYING
BONUS/ STOCK ALL OTHER
NAME AND POSITION YEAR SALARY COMMISSION OPTIONS COMPENSATION
- ---------------------------------------- ---- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Paul J. Wilson.......................... 1996 $205,250 $ -- -- $ 4,750(1)
President & Chief Executive Officer 1995 $191,875 $ -- -- $ 4,620(1)
1994 $179,500 $ -- 100,000 $ --
Mark J. Newman.......................... 1996 $122,500 $ 22,000 40,000 $ 4,750(1)
Vice President 1995 $108,513 $ 20,000 175,000 $29,128(2)
R&D 1994 $ NA $ NA -- $ --
Mark W. Reynolds(3)..................... 1996 $ 82,333 $ 25,000 -- $ 4,750(4)
Chief Financial Officer and Secretary 1995 $ 76,000 $ 8,000 -- $ 4,620(4)
1994 $ 71,000 $ 8,000 -- $ 4,620(4)
James M. Yahres(3)...................... 1996 $151,000 $ 5,000 -- $ 4,750(4)
Former Chief Financial Officer 1995 $146,500 $ 15,000 -- $ 4,620(4)
and Secretary 1994 $141,000 $ 25,000 -- $ 4,620(4)
</TABLE>
- ---------------
(1) Vaxcel's matching contribution to CytRx's 401(k) Plan. Vaxcel does not have
a 401(k) Plan. Employees of Vaxcel are eligible to participate in CytRx's
401(k) Plan.
(2) Includes $3,830 of Vaxcel's matching contributions to CytRx's 401(k) Plan
and $25,298 of costs associated with relocation.
(3) Mr. Reynolds and Mr. Yahres are employees of CytRx. No compensation is paid
by Vaxcel directly to these individuals; the amounts shown in the table
above represent total compensation paid to Mr. Reynolds and Mr. Yahres by
CytRx for services rendered in all capacities for CytRx and its
subsidiaries. Pursuant to a services and facilities use agreement between
Vaxcel and CytRx (see "Business of Vaxcel -- Certain Transactions"), Vaxcel
pays to CytRx a fee for the services rendered by these individuals as well
as for other administrative services.
(4) CytRx's matching contribution to 401(k) Plan.
EMPLOYMENT AGREEMENT
The employment agreement for Paul J. Wilson, President and Chief Executive
Officer of Vaxcel (the "Employment Agreement"), provides for a five-year term of
employment beginning August 16, 1993. Pursuant to the terms of the Employment
Agreement, Mr. Wilson's annual cash compensation is currently $214,000 and will
increase to $229,000, effective August 16, 1997, during the remaining term of
the Employment Agreement. In addition, Mr. Wilson has received options to
purchase up to 500,000 shares of Vaxcel Common Stock. Such options have an
exercise price of $1.50 per share. All of the options will vest
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<PAGE> 94
over the five-year period of Mr. Wilson's Employment Agreement if Vaxcel
achieves during such time period certain milestones related to both the vaccine
technologies and Vaxcel.
The Employment Agreement may be terminated by Vaxcel under customary
circumstances, including "for cause" (as defined in the Employment Agreement),
without cause and upon the death or disability of Mr. Wilson. Upon termination
for cause, Mr. Wilson would be entitled to receive severance equal to from one
to three months' salary, depending upon the specific "for cause" event. Upon
termination of employment without cause by Vaxcel, Mr. Wilson would receive his
salary for one year (at the then current salary rate). Upon termination of
employment by reason of death or disability, Mr. Wilson would receive severance
equal to six months' salary. The vesting of options shall cease upon any
employment termination for cause; if Mr. Wilson's employment is terminated by
Vaxcel for any other reason, certain options that would have vested on the next
anniversary will be accelerated to vest immediately and certain others may vest
during the twelve-month period after termination.
The current annual cash compensation for Dr. Mark J. Newman, Vice President
of Research and Development of Vaxcel, is $122,500 and will increase to $129,500
effective January 1, 1997. Dr. Newman is also eligible for an annual cash bonus
based on performance. Pursuant to his employment, Dr. Newman has also received
options to purchase up to 215,000 shares of Vaxcel Common Stock. Such options
have an exercise price of $1.50 per share. All of the options will vest over a
four-year period ending January 1999 if Vaxcel achieves during such time period
certain milestones related to its vaccine adjuvant/delivery system technologies.
Option Grants in Last Fiscal Year. The following table summarizes the
stock options granted during the fiscal year ended December 31, 1996, to each of
Vaxcel's executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL POTENTIAL REALIZED VALUE
UNDERLYING OPTIONS AT ASSUMED ANNUAL RATES
OPTIONS GRANTED TO EXERCISE OR OF STOCK PRICE APPRECIATION
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------
NAME (#) FISCAL YEAR ($/SHARE) DATE 5% 10%
- --------------------------- ---------- ------------ ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Mark J. Newman............. 40,000 85.8 $1.50 12/05/06 $ 37,734 $ 95,625
</TABLE>
1993 STOCK OPTION PLAN
Effective June 1, 1993, Vaxcel adopted its 1993 Stock Option Plan, as later
amended (the "Stock Option Plan" or the "Plan") for the purpose of promoting the
interests of Vaxcel by granting options to purchase Vaxcel Common Stock to key
employees, consultants, and non-employee and affiliate employee directors in
order to attract and retain qualified persons in those positions and in order to
provide an additional incentive to each such person to increase the value of the
Vaxcel Common Stock. Vaxcel has reserved 1,000,000 shares of Vaxcel Common Stock
for issuance under the Stock Option Plan, and the Plan is administered by the
Vaxcel Board. Pursuant to the Stock Option Plan, the Vaxcel Board, in its
complete discretion may grant options qualified under Section 422 of the Code to
"key employees" or consultants. The Stock Option Plan defines the term "key
employee" to mean any employee or officer of Vaxcel or the parent corporation or
any subsidiary of Vaxcel who, in the judgment of the Vaxcel Board acting in its
discretion, is a key to the success of Vaxcel or such parent or subsidiary.
Non-employee and affiliate employee directors also receive options pursuant to
the Stock Option Plan. The exercise price for all options granted under the Plan
shall be determined in accordance with the terms of the Plan, but in no event
shall the exercise price be less than the fair market value of a share of the
Vaxcel Common Stock on the date the option is granted. All qualified stock
options granted to key employees and consultants shall be exercisable as
determined by the Vaxcel Board at the time the option is granted, but in no
event shall the exercise date be later than the tenth anniversary of the date
the option is granted if the key employee or consultant is not a 10% stockholder
of Vaxcel. The options granted to non-
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<PAGE> 95
employee and affiliate employee Directors shall become exercisable with respect
to 33% of the Vaxcel Common Stock underlying such option on each anniversary
date following the date of the grant.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Provisions of Certificate of Incorporation. As allowed by the DGCL,
Vaxcel's Certificate of Incorporation provides for the limitation of the
liability of the directors of Vaxcel for monetary damages to the fullest extent
permissible under Delaware law. This is intended to limit the personal liability
of a director to monetary damages incurred in an action brought by or in the
right of Vaxcel for breach of a director's duties to Vaxcel or its stockholders:
(i) for acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law; (ii) for any breach of the director's duty of loyalty
to Vaxcel or its stockholders; (iii) for any transaction from which a director
has derived an improper personal benefit; and (iv) as expressly imposed by
statute, for approval of certain improper distributions to stockholders or the
wasting of Vaxcel assets.
Bylaws. Vaxcel's Bylaws also permit Vaxcel to indemnify its officers and
directors to the fullest extent permitted by law.
Directors and Officers Insurance. As a majority-owned subsidiary of CytRx,
Vaxcel directors and officers are covered by CytRx's directors and officers
liability insurance policy which has a $3,000,000 limit.
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<PAGE> 96
PRINCIPAL STOCKHOLDERS OF VAXCEL
The following table sets forth certain information, as of December 31,
1996, regarding the beneficial ownership of the Vaxcel Common Stock, and the
issuing of Vaxcel Common Stock pursuant to the Merger with respect to: (i) each
director of Vaxcel, (ii) each person who is known by Vaxcel to own beneficially
5% or more of the Vaxcel Common Stock, (iii) each of the named executive
officers, and (iv) all directors and executive officers of Vaxcel as a group.
The table sets forth the number and percentage of the outstanding shares
projected to be beneficially owned by each of such shareholders after
consummation of the Merger.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO MERGER AFTER THE MERGER
--------------------- ---------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------- --------- ------- --------- -------
<S> <C> <C> <C> <C>
CytRx Corporation.......................... 8,250,004 97.8% 9,625,000 86.1%
154 Technology Parkway
Norcross, Georgia 30092
Paul J. Wilson............................. 120,000(2) 1.4% 120,000(2) 1.1%
5775 Commons Lane
Alpharetta, Georgia 30202
Mark J. Newman............................. 25,000(2) 0.3% 25,000(2) 0.2%
230 Lazy Shade Court
Duluth, Georgia 30136
Jack L. Bowman............................. 6,500(2) 0.1% 6,500(2) 0.1%
9102 Mt. Vista Avenue
Lummi Island, Washington 98262
Raymond C. Carnahan, Jr.................... 0 0.0% 0 0.0%
2 Tiffany Road
Morristown, New Jersey 07960
Jack J. Luchese............................ 0 0.0% 0 0.0%
3915 River Hallow Run
Duluth, Georgia 30136
Herbert H. McDade, Jr...................... 6,500(2) 0.1% 6,500(2) 0.1%
19 Beechwood Way
Scarborough, New York 10510
Mark W. Reynolds........................... 0 0.0% 0 0.0%
9325 Delft Way
Alpharetta, Georgia 30202
All directors and executive officers as a
group (7 individuals).................... 158,000 1.9% 158,000 1.4%
</TABLE>
- ---------------
(1) Unless otherwise indicated and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting and
investment power with respect to the shares shown as beneficially owned by
such stockholder. A person is deemed to be the beneficial owner of
securities that can be acquired by such person within 60 days from the date
of this Proxy Statement upon exercise of options and warrants. Each
beneficial owner's percentage ownership is determined by assuming options
that are held by such person (but not those held by any other person) and
that are exercisable within sixty days from the date of this Proxy Statement
have been exercised.
(2) Made up of shares of Vaxcel Common Stock that the individual has option
rights to acquire which are vested as of the date of this Proxy Statement
and which are immediately exercisable as of the date of this Proxy
Statement.
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<PAGE> 97
SELECTED HISTORICAL FINANCIAL DATA OF ZYNAXIS
The selected consolidated financial data as of December 31, 1994 and
December 31, 1995, and for each of the three years in the period ended December
31, 1995, is derived from the consolidated financial statements of Zynaxis,
which are incorporated by reference in Zynaxis' Form 10-K/A-1 for the year ended
December 31, 1995. Such financial statements have been audited by Arthur
Andersen LLP, independent public accountants, whose report on the financial
statements includes an explanatory paragraph concerning Zynaxis' ability to
continue as a going concern. The selected consolidated financial data as of
December 31, 1991, December 31, 1992 and December 31, 1993, and for the years
ended December 31, 1991 and 1992, is derived from the audited financial
statements of Zynaxis, not included or incorporated by reference herein. The
selected consolidated statement of operations data for the nine months ended
September 30, 1995 and 1996 and the selected consolidated balance sheet data as
of September 30, 1996, have been derived from unaudited consolidated financial
statements of Zynaxis, which are incorporated by reference in Zynaxis' Form 10-Q
for the quarterly period ended September 30, 1996, that, in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for fair presentation of such data at such dates and for
such periods in accordance with generally accepted accounting principles. The
selected consolidated financial data for the nine months ended September 30,
1996 are not necessarily indicative of the results to be expected for the full
year. The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of Zynaxis
and notes thereto incorporated by reference in this Proxy Statement.
<TABLE>
<CAPTION>
FOR THE FOR THE
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------------- -----------------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Revenues......... $ 1,689,205 $ 305,816 $ 761,792 $ 1,163,955 $ 1,573,550 $ 1,166,658 $ 199,172
Operating Expenses:
Cost of sales.... -- 40,261 40,262 273,088 -- -- --
Research and
development.... 2,781,827 4,192,422 5,168,912 6,344,221 7,042,790 4,341,691 3,030,627
Marketing,
general and
administrative... 1,333,356 1,547,162 2,239,921 3,397,948 2,875,112 1,263,317 583,326
Charge for
acquired
research and
development.... -- 3,647,321 5,165,793 -- -- -- --
Restructuring
charge......... -- 347,436 347,436 -- -- -- --
Provision for
asset
impairment..... -- -- -- 1,466,360 -- -- --
------------ ------------ ------------- ------------- ------------ ------------- ------------
4,115,183 9,774,602 12,962,324 11,481,617 9,917,902 5,605,008 3,613,953
Other Income
(Expense):
Interest income
(expense),
net............ 10,956 38,104 44,023 106,259 574,261 1,023,676 (65,575)
Other income
(expense)...... 420,346 91,134 162,232 -- -- -- --
Net gain on sale
of diagnostics
technologies
and assets..... -- 1,595,616 1,616,840 -- -- -- --
------------ ------------ ------------- ------------- ------------ ------------- ------------
431,302 1,724,854 1,823,095 106,259 574,261 1,023,676 (65,575)
Net loss........... $(1,994,676) $ (7,743,932) $ (10,377,437) $ (10,211,403) $ (7,770,091) $ (3,414,674) $ (3,480,356)
----------- ------------ ------------- ------------- ------------ ------------- ------------
Net loss per common
share............ $ (0.20) $ (1.29) $ (1.57) $ (1.95) $ (1.49) $ (0.71) $ (1.69)
=========== ============ ============= ============= ============ ============= ============
Shares used in
computing net
loss per common
share(1)......... 10,060,509 5,988,748 6,602,813 5,241,317 5,204,967 4,837,661 2,061,560
<CAPTION>
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
------------- -----------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash
equivalents and
investments.... $ 223,177 $ 509,143 $ 2,216,456 $ 15,375,621 $ 22,901,516 $ 401,455
Working capital
(deficit)...... (1,307,660) (733,698) 1,122,483 12,917,242 13,005,985 (1,515,674)
Total assets..... 2,933,269 3,987,828 6,399,135 20,888,148 24,429,508 1,672,064
Long-term debt
and other
long-term
obligations.... 157,087 183,403 212,245 3,833,841 312,058 11,989,041
Shareholders'
equity
(deficit)(2)... 1,023,517 2,357,595 5,277,193 15,463,531 23,063,154 (12,357,179)
</TABLE>
- ---------------
(1) Computed on basis described for net loss per share in Note 2 to the
consolidated financial statements of Zynaxis.
(2) Includes accretion of $2,543,068 to Zynaxis Preferred Stock redemption
value. No dividends on the Zynaxis Common Stock have been declared or paid
since the inception of Zynaxis.
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BUSINESS OF ZYNAXIS
Zynaxis, which commenced operations in 1988 and completed its initial
public offering in 1992, is a company engaged in the development of delivery
systems designed to enhance the performance of vaccines and drugs. In July 1995,
through a merger, Zynaxis acquired Secretech, a biotechnology company engaged in
the development of oral and mucosal vaccine delivery technologies. Vaccines
using Zynaxis' proprietary delivery systems can be administered orally or
nasally rather than by injection and have the potential to increase protective
immunity by stimulating formation of antibodies at the most common points of
entry for infectious agents. In October 1995, Zynaxis entered into a development
and licensing agreement with ALK, a Danish company and a leader in the area of
specific immunotherapy for allergies, which grants to ALK exclusive rights to
evaluate and develop Zynaxis' vaccine technologies for delivery of bioactive
substances to treat allergies. Prior to the acquisition of Secretech, Zynaxis
focused on the development of proprietary cell linker molecule technology
(Zyn-Linkers(R)) for the retention at disease sites of therapeutic drugs and
radiopharmaceuticals, as well as the development of cellular diagnostic products
(Zymmune(TM) CD4/CD8 Cell Monitoring Kit) to type and enumerate blood cells for
diagnosis and disease monitoring. In October 1995, Zynaxis sold the assets of
its cellular diagnostic products business to Intracel Corporation. In September
1996, Zynaxis entered into an exclusive license and purchase option agreement
with Phanos pursuant to which it granted Phanos a license for all of its
proprietary Zyn-Linker(R) technology and an option to acquire such technology.
Zynaxis also operates the Cauldron division which provides collaborative
consulting services on all aspects of bulk pharmaceutical production and
provides research, development and pilot scale-up facilities to the
pharmaceutical, biochemical and fine chemical industries. Zynaxis presently is
seeking a buyer for the Cauldron division.
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<PAGE> 99
SELLING SHAREHOLDERS OF ZYNAXIS
The table below sets forth certain information regarding ownership of the
Vaxcel Common Stock by the Selling Shareholders as of December 15, 1996 (after
giving effect to the Merger and the exercise of the Vaxcel Warrants), and the
number of Resale Shares to be sold by them under this Proxy Statement. The
Resale Shares include (i) the shares of Vaxcel Common Stock issued by Vaxcel
hereunder to any persons who may be deemed to be "affiliates" of Zynaxis within
the meaning of Rule 145 of the Securities Act, (ii) the shares of Vaxcel Common
Stock issued by Vaxcel hereunder to certain shareholders of Zynaxis who have
entered into agreements with CytRx to vote in favor of the Merger at the Special
Meeting, (iii) the shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants issued by Vaxcel pursuant to the Preferred Stock and Warrant
Agreement and the Agreement to holders of Zynaxis Warrants in exchange for such
Zynaxis Warrants, and (iv) the shares of Vaxcel Common Stock issuable upon the
exercise of Vaxcel Non-Financing Warrants assumed pursuant to the Agreement in
exchange for the Zynaxis Non-Financing Warrants.
In recognition of the fact that investors may wish to be legally permitted
to sell their Resale Shares when they deem appropriate, Vaxcel has filed with
the SEC, under the Securities Act, a Registration Statement, of which this Proxy
Statement forms a part, with respect to the resale of the Resale Shares from
time to time in transactions on the Nasdaq SmallCap Market, in negotiated
transactions or through other methods of sale and intends to prepare and file
such amendments and supplements to the Registration Statement as may be
necessary to keep the Registration Statement effective until the earlier of the
date on which the Resale Shares may be sold without restriction under the
Securities Act and the fifth anniversary of the Closing of the Merger. See "Plan
of Distribution."
<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
PRIOR TO OFFERING(1) AFTER OFFERING
---------------------- SHARES ----------------------
NUMBER OF BEING NUMBER OF
NAME OF SELLING SHAREHOLDER SHARES PERCENT(2) OFFERED(1) SHARES PERCENT(2)
- ------------------------------------------ --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Euclid Partners III, L.P.(3).............. 289,285 2.6% 287,285 -- --
S.R. One, Limited(4)...................... 227,056 2.1% 227,056 -- --
Sentron Medical, Inc.(5).................. 145,620 1.3% 145,620 -- --
Javelin Capital Fund, L.P.(6)............. 94,900 * 94,900 -- --
Alphi Fund L.P.(7)........................ 71,650 * 71,650 -- --
MassMutual Life Insurance Company(8)...... 61,685 * 14,235 47,450 *
Plexus Ventures, Inc.(9).................. 48,034 * 48,034 -- --
The West Company(10)...................... 47,450 * 47,450 -- --
William M. Spencer, III(11)............... 45,781 * 10,439 35,342 *
CIP Capital L.P.(12)...................... 33,689 * 33,689 -- --
Grotech Partners III, L.P.(13)............ 29,067 * 5,027 24,040 *
The UAB Research Foundation(14)........... 28,202 * 18,980 9,222 *
Biotechnology Venture Fund S.A.(15)....... 18,980 * 9,490 9,490 *
Gus G. Casten(16)......................... 13,688 * 13,688 -- --
Dennis P. Schafer(17)..................... 13,198 * 13,198 -- --
Grotech Partners II, L.P.(18)............. 3,800 * 655 3,145 *
Commonwealth Venture Partners I,
L.P.(19)................................ 3,796 * 3,796 -- --
Grotech III Companion Fund, L.P.(20)...... 3,502 * 598 2,904 *
Grotech III Pennsylvania Fund, L.P.(21)... 2,104 * 360 1,744 *
Comdisco, Inc.(22)........................ 1,083 * 1,083 -- --
Philadelphia Ventures-Japan I, L.P.(23)... 949 * 949 -- --
</TABLE>
- ---------------
(*) Less than 1%.
(1) Assumes the issuance of the Vaxcel Common Stock in the Merger in exchange
for Zynaxis Common Stock, Zynaxis Preferred Stock and Zynaxis Notes and the
exercise of Vaxcel Warrants to be issued in
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<PAGE> 100
the Merger in exchange for Zynaxis Warrants and Vaxcel Non-Financing
Warrants assumed in exchange for Zynaxis Non-Financing Warrants.
(2) Based on 11,000,000 shares of Vaxcel Common Stock to be outstanding upon
the consummation of the Merger.
(3) Includes 64,605 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger.
Stephen K. Reidy, a director of Zynaxis from April 1995 to the Merger, is a
general partner of Euclid Associates III, L.P., the general partner of
Euclid Partners III, L.P.
(4) Includes 17,655 shares owned of record by SmithKline Beecham Corporation,
the parent of S.R. One, Limited. Also includes 51,246 shares of Vaxcel
Common Stock issuable upon the exercise of Vaxcel Warrants to be issued to
the Selling Shareholder in the Merger.
(5) Includes 25,623 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger.
(6) Includes 47,450 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger. Lyle
A. Hohnke, a director of Zynaxis from April 1996 to the Merger, is a member
of Javelin Venture Partners, L.L.C., a general partner of Javelin Capital
Fund, L.P.
(7) Includes 28,470 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger.
(8) Includes 14,235 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger.
Barry Gonder, a director of Zynaxis from March 1996 to September 1996, was
an officer of Connecticut Mutual Life Insurance Company, the predecessor to
MassMutual Life Insurance Company.
(9) Includes 14,235 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger. John
F. Chappell, a director of Zynaxis from July 1995 to the Merger, is the
President and sole shareholder of Plexus Ventures, Inc.
(10) Includes 23,735 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger.
Donald E. Morel, Jr., a director of Zynaxis from July 1995 to the Merger,
is a vice president of The West Company.
(11) Also includes 10,439 shares of Vaxcel Common Stock issuable upon the
exercise of Vaxcel Warrants to be issued to the Selling Shareholder in the
Merger.
(12) Includes 25,148 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger.
(13) Includes 5,027 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger.
Grotech Partners III, L.P., Grotech Partners II, L.P., Grotech III
Companion Fund, L.P. and Grotech III Pennsylvania Fund, L.P. are affiliated
venture capital funds, of which Grotech Capital Group, Inc. ("GCGI") is the
general partner, except for Grotech Partners II, L.P. for which it is the
general partner of the general partner. Deborah A. Smeltzer, a director of
Zynaxis from 1990 to February 1995, was a managing director of GCGI during
that time.
(14) Includes 18,980 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger.
(15) Includes 9,490 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger.
(16) Includes 2,372 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger.
(17) Mr. Schafer was a director of Zynaxis from July 1995 to the Merger.
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<PAGE> 101
(18) Includes 655 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger. See
note (13) with respect to information regarding the Selling Shareholder's
relationship to Zynaxis.
(19) Includes 1,898 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger.
Commonwealth Venture Partners I, L.P. ("Commonwealth") is an affiliated
venture capital fund of Philadelphia Ventures-Japan I, L.P., both of which
are managed by Philadelphia Ventures, Inc. ("PVI"). Thomas R. Morse, a
director of Zynaxis from 1988 to July 1995, is a general partner of
Commonwealth and an officer and shareholder of PVI.
(20) Includes 598 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger. See
note (13) with respect to information regarding the Selling Shareholder's
relationship to Zynaxis.
(21) Includes 360 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger. See
note (13) with respect to information regarding the Selling Shareholder's
relationship to Zynaxis.
(22) Represents 1,083 shares of Vaxcel Common Stock issuable upon the exercise
of Vaxcel Warrants to be issued to the Selling Shareholder in the Merger.
(23) Includes 474 shares of Vaxcel Common Stock issuable upon the exercise of
Vaxcel Warrants to be issued to the Selling Shareholder in the Merger. See
note (19) with respect to information regarding the Selling Shareholder's
relationship to Zynaxis.
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<PAGE> 102
PLAN OF DISTRIBUTION
The Registration Statement of which this Proxy Statement is a part relates
to and covers the reoffering and resale by the Selling Shareholders (who are
listed in the Selling Shareholders of Zynaxis table included herein), or their
pledgees, donees, transferees or other successors, of the Resale Shares issued
or issuable to them by Vaxcel. Any Resale Shares owned by the Selling
Shareholders may be offered by them from time to time in transactions (which may
involve crosses and block transactions) on the Nasdaq SmallCap Market, in
negotiated transactions or otherwise, at market prices prevailing at the time of
sale or at negotiated prices. Selling Shareholders may sell some or all of the
shares in transactions involving broker-dealers, who may act solely as agent or
who may acquire shares as principal. There is no assurance that the Selling
Shareholders will sell any or all of the shares offered hereby. Broker-dealers,
agents or underwriters participating in such transactions as agent may receive
commissions from the Selling Shareholders and, if they act as agent for the
purchaser of the shares, from the purchaser. Participating broker-dealers may
agree with the Selling Shareholders to sell a specified number of shares at a
stipulated price per share, and to the extent such broker-dealer is unable to do
so as agent for the Selling Shareholders, the broker-dealer may purchase as
principal any unsold shares at the price required to fulfill the broker-dealer's
commitment to the Selling Shareholders. In addition, shares may be sold by
Selling Shareholders by or through broker-dealers in special offerings, exchange
distributions or secondary distributions, and in connection therewith
commissions in excess of the customary commission prescribed by applicable rules
may be paid to participating broker-dealers or, in the case of certain secondary
distributions, a discount or concession from the offering price may be allowed
to participating broker-dealers in excess of such customary commissions.
Broker-dealers who acquire shares as principal may thereafter resell such shares
from time to time in transactions on the Nasdaq SmallCap Market, in negotiated
transactions or otherwise, at market prices prevailing at the time of sale or at
negotiated prices, and in connection with such resales may pay to or receive
commissions from the purchaser of such shares.
The Selling Shareholders and any underwriters, broker-dealers or agents
that participate in a distribution of such shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any discounts,
commissions or concessions received by any such underwriters, dealers or agents
might be deemed to be underwriting discounts and commissions under the
Securities Act. Under applicable rules and regulations under the Exchange Act,
any person engaged in a distribution of any of the Resale Shares may not
simultaneously engage in market activities with respect to any of the Resale
Shares for a period of nine business days prior to the commencement of such
distribution. In addition, the Selling Shareholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Rules 10b-6 and 10b-7, which provisions
may limit the timing of purchases and sales of Resale Shares by the Selling
Shareholders. All of the foregoing may affect the marketability of the Resale
Shares.
Vaxcel and Zynaxis will pay substantially all expenses incident to the
reoffering of the Resale Shares by the Selling Shareholders to the public, other
than commissions and discounts of underwriters, dealers or agents. Vaxcel will
receive no proceeds from any sales of such shares under this Proxy Statement by
any Selling Shareholders.
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<PAGE> 103
PROPOSED ASSET SALES
Under Section 1932 of the PBCL, a sale of substantially all of the assets
of a Pennsylvania corporation may be made only pursuant to a plan of asset
transfer approved by the shareholders of such corporation. Pursuant to Section
1932(b) of the PBCL, the plan of asset transfer shall set forth the terms and
conditions of the sale, lease, exchange or other disposition or may authorize
the board of directors to fix any or all of the terms and conditions, including
the consideration to be received by the corporation therefor. The plan of asset
transfer adopted by the Zynaxis Board and proposed by the Zynaxis Board to the
holders of the Zynaxis Capital Stock grants to the Zynaxis Board unrestricted
authority to sell any and all of the assets of Zynaxis (the "Assets") on any
terms and conditions deemed necessary or appropriate by the Zynaxis Board.
Pursuant to the Liquidation Agreement, the Zynaxis Board has authorized
CytRx to serve as Zynaxis' agent and assist Zynaxis in selling the Assets at the
prices and settling of the liabilities listed in the Liquidation Agreement for
the amounts specified in the Liquidation Agreement no greater than indicated. In
particular, the Liquidation Agreement provides for the sale of the leasehold
improvements, physical plant and laboratory equipment related to the Cauldron
division and the leasehold improvements, physical plant and laboratory equipment
associated with other aspects of Zynaxis. In addition, the Liquidation Agreement
calls for the collection of certain notes receivable. Pursuant to the
Liquidation Agreement, the Zynaxis Board (and any applicable committees thereof)
also approved (i) an operating budget for the period between the date of the
Liquidation Agreement and the Closing, (ii) certain agreements to be entered
into by Zynaxis and CytRx with Martyn D. Greenacre and Michael A. Christie, and
(iii) an agreement between QED and Zynaxis covering QED's relationship as
Zynaxis' agent for the sale of the Cauldron division. Because the plan of asset
transfer grants the Zynaxis Board unrestricted authority to sell the Assets, the
Zynaxis Board may amend the Liquidation Agreement to change the Assets to be
sold, the selling prices of such Assets, the liabilities to be settled or the
settlement value of such liabilities, all without obtaining any further approval
of the holders of the Zynaxis Capital Stock.
Pursuant to the Liquidation Agreement, Zynaxis has committed to exert its
commercially reasonable best efforts to sell the Assets and to cooperate with
CytRx in its efforts to assist Zynaxis in selling the Assets. Zynaxis has
committed to approve and execute documents evidencing and perform any agreement
negotiated by Zynaxis or CytRx with any prospective purchaser of any Zynaxis
asset if (i) the purchase price is no lower than the amount and is consistent
with the terms set forth in the Liquidation Agreement, and (ii) the other terms
and conditions of the transaction are not less favorable to Zynaxis in any
material respect than the terms and conditions of similar transactions.
Zynaxis has committed to exert its commercially reasonable best efforts to
settle the liabilities and to cooperate with CytRx in its efforts to assist in
settling the liabilities. Zynaxis has committed to approve and execute documents
evidencing and perform any agreement negotiated by Zynaxis or CytRx with any
creditor for any liability, if (i) the cash payment required to be paid by
Zynaxis to such creditor is no greater than the settlement amount and is
consistent with the terms set forth for such liability in the Liquidation
Agreement, and (ii) the other terms and conditions of the transaction are not
less favorable to Zynaxis in any material respect than the terms and conditions
of similar transactions.
The Liquidation Agreement further provides that, subject to approval by the
Committee (as defined below), which approval will not be unreasonably withheld,
Vaxcel shall approve and execute documents evidencing and perform any agreement
negotiated by CytRx with any counsel, accountants, appraisers, brokers and other
advisors in connection with the transactions (all for the account of Zynaxis),
if (i) such person is not an affiliate of CytRx, and (ii) the terms and
conditions of such agreement, taken as a whole, are fair to Zynaxis.
In connection with CytRx's activities on Zynaxis' behalf, the Liquidation
Agreement provides that Zynaxis agrees to cooperate with CytRx, to furnish or
cause to be furnished to CytRx such information and data as CytRx may reasonably
request, and to give CytRx reasonable access to Zynaxis' officers, directors,
employees, appraisers and independent accountants.
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<PAGE> 104
The members of the Committee are John F. Chappell, Stephen K. Reidy and
Martyn D. Greenacre, and the Committee has full authority of the Zynaxis Board
to authorize the transactions and the institution and prosecution of actions
(including arbitration proceedings) relating to the transactions contemplated by
the Liquidation Agreement. The Committee will confer with CytRx at such times as
CytRx reasonably requests.
The Liquidation Agreement also provides that Zynaxis will reimburse CytRx
promptly for all reasonable out-of-pocket expenses, including reasonable fees
and expenses of CytRx's counsel, incurred in connection with the rendering of
CytRx's services under the Liquidation Agreement. Zynaxis also agrees to
indemnify CytRx in accordance with certain indemnification provisions.
CytRx may terminate the Liquidation Agreement at any time upon written
notice, without liability or continuing obligation to Zynaxis. Zynaxis may not
terminate the Liquidation Agreement unless and until the Agreement is
terminated.
THE BOARD OF DIRECTORS OF ZYNAXIS RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE ASSET SALES.
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<PAGE> 105
AMENDMENT OF ZYNAXIS
ARTICLES OF INCORPORATION
The text of the proposed amendment to the Articles of Incorporation of
Zynaxis to be effected by the Charter Amendment, is attached as Appendix C to
this Proxy Statement and is incorporated herein by reference. The following
summary is qualified in its entirety by reference to Appendix C to the Proxy
Statement.
Zynaxis is subject to various statutory "anti-takeover" provisions of the
PBCL, including Subchapter 25E of the PBCL. Subchapter 25E of the PBCL generally
provides that any holder of voting shares of a Pennsylvania registered
corporation that becomes the subject of a control transaction (as described
below) is entitled to receive cash for each of such person's voting shares in an
amount equal to the "fair value" of each voting share as of the date on which
such control transaction occurred. Although Subchapter 25E of the PBCL provides
for a judicial appraisal procedure, "fair value" is defined to be not less than
the highest price per share paid by the acquiror in a control transaction at any
time during the 90-day period ending on and including the date of the control
transaction, plus, to the extent not reflected in such price paid, an increment
representing any value, including, without limitation, any proportion of any
value payable for control of such corporation. A control transaction is the
acquisition by a person (or group of persons acting in concert) of voting power
over voting shares of a registered corporation which would entitle the holders
of such shares to cast 20% or more of the votes that all shareholders would be
entitled to cast in an election of directors of such corporation.
Because of Subchapter 25E of the PBCL, CytRx could not purchase 20% or more
of the shares of Zynaxis Capital Stock in a tender offer or other transaction
without all holders of shares of Zynaxis Capital Stock having the right to
immediately put the shares of Zynaxis Capital Stock to CytRx for at least the
cash value of the consideration to be offered in the Agreement. Unless the
Zynaxis shareholders approve the Charter Amendment, Vaxcel and CytRx will have
to comply with the provisions of Subchapter 25E.
Pursuant to Section 2541(a)(4) of the PBCL, the articles of incorporation
of a Pennsylvania corporation can explicitly provide that Subchapter 25E is not
applicable either by a provision contained in the original articles of
incorporation of such corporation or by an amendment adopted by the shareholders
of such corporation prior to a control transaction.
The Articles of Incorporation of Zynaxis do not currently contain a
provision making Subchapter 25E inapplicable to Zynaxis. The adoption of the
Charter Amendment amending the Articles of Incorporation and making Subchapter
25E inapplicable to the Merger is a condition to consummation of the Merger. The
vote required for approval of the Charter Amendment is an affirmative vote of
(i) a majority of the votes cast, whether in person or by proxy, by all holders
of Zynaxis Preferred Stock (voting on an as converted basis) and by all holders
of Zynaxis Common Stock, entitled to vote and voting together as a class; and
(ii) a majority of the votes cast, whether in person or by proxy, by all holders
of Zynaxis Preferred Stock, entitled to vote and voting as a separate class.
THE ZYNAXIS BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE CHARTER
AMENDMENT.
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<PAGE> 106
DESCRIPTION OF VAXCEL CAPITAL STOCK
The authorized capital stock of Vaxcel consists of 30,000,000 shares of
Vaxcel Common Stock, par value $.001 per share, and 2,000,000 shares of
Preferred Stock, par value $.001 per share ("Vaxcel Preferred Stock").
COMMON STOCK
As of December 23, 1996, there were 8,250,004 shares of Vaxcel Common Stock
outstanding, all of which are held by CytRx. Holders of shares of Vaxcel Common
Stock are entitled to one vote per share on all matters to be voted upon by the
shareholders and are not entitled to cumulative votes for the election of
directors. Holders of shares of Vaxcel Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
Board of Directors of Vaxcel out of funds legally available therefor. In the
event of liquidation, dissolution or winding up of Vaxcel, the holders of shares
of Vaxcel Common Stock are entitled to share ratably in all assets remaining
outstanding. Shares of Vaxcel Common Stock have no preemptive, conversion or
other subscription rights and there are no redemption or sinking fund provisions
applicable to Vaxcel Common Stock.
For a further description of Vaxcel Common Stock, see "Effects of the
Merger on Rights of Shareholders."
PREFERRED STOCK
Vaxcel is authorized to issue up to 2,000,000 shares of Vaxcel Preferred
Stock, none of which are outstanding. The shares of Vaxcel Preferred Stock may
be issued by the Vaxcel Board, from time to time, in one or more classes or
series, the shares of each class or series having such voting powers, full or
limited, or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions, as are stated and expressed in the Certificate of Incorporation
or in the resolution or resolutions providing for the issue of such class or
series, adopted by Vaxcel's Board.
VAXCEL WARRANTS
The Vaxcel Warrants to be issued in exchange for the Zynaxis Warrants upon
consummation of the Merger are governed by the Preferred Stock and Warrant
Agreement and their own terms. The Vaxcel Warrants are convertible into shares
of Vaxcel Common Stock. Pursuant to their terms, the Vaxcel Warrants are
immediately exercisable upon consummation of the Merger and have a term of one
year from the Closing. The Vaxcel Warrants are exercisable at a price per share
equal to: (i) the Per Share Price divided by (ii) the Exchange Ratio (the
"Vaxcel Warrant Price"). Beginning at the sixtieth day following the Closing,
the Vaxcel Warrants are exercisable at a price per share equal to two times the
Vaxcel Warrant Price in effect immediately prior to such time, subject to
adjustment by the terms of such Vaxcel Warrant in the case of a merger,
consolidation, or reorganization of Vaxcel.
The Vaxcel Warrants may be exercised during their term in whole or in part
by the surrender of such Vaxcel Warrant, with the purchase agreement attached to
such Vaxcel Warrant properly completed and executed, at the principal office of
Vaxcel and upon payment to it by certified check or bank draft to the order of
Vaxcel for the purchase price for the shares to be purchased upon such exercise.
The Vaxcel Warrants and the shares of Vaxcel Common Stock that may be
issued upon exercise thereof have not been registered under the Securities Act,
by reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act pursuant to the exemption provided in Section
4(2) thereof, and have not been registered under state securities laws by reason
of their issuance in a transaction exempt from such registration requirements.
The Vaxcel Warrants may not be sold, transferred or otherwise disposed of unless
registered under the Securities Act and applicable state securities laws
registration. However, under the Agreement, Vaxcel has agreed to keep the
Registration Statement effective to cover the resale of shares issued pursuant
to the Vaxcel Warrants.
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<PAGE> 107
The Vaxcel Warrants also provide that, prior to any transfer of such a
Warrant, the holder will give written notice to Vaxcel of such holder's
intention to effect such transfer and to comply with the terms of the Vaxcel
Warrant. Each such notice must contain (i) a statement setting forth the
intention of such holder's prospective transferee with respect to its retention
or disposition of the Vaxcel Warrant, and (ii) unless waived by Vaxcel, an
opinion of counsel for such holder (who may be the inside or staff counsel
employed by such holder), as to the necessity or non-necessity for registration
under the Securities Act and applicable state securities laws in connection with
such transfer and stating the factual and statutory bases relied upon by
counsel. If in the opinion of counsel for Vaxcel the proposed transfer of the
Vaxcel Warrant may be effected without registration or qualification under the
Securities Act and any applicable state securities laws, then the registered
holder of the Vaxcel Warrant shall be entitled to transfer the Vaxcel Warrant in
accordance with the intended method of disposition specified in the statement
delivered by such holder to Vaxcel. If in the opinion of counsel for Vaxcel the
proposed transfer of the Vaxcel Warrant may not be effected without registration
under the Securities Act or registration or qualification under any applicable
state securities laws, the registered holder of the Vaxcel Warrant shall not be
entitled to transfer the Vaxcel Warrant until the requisite registration or
qualification is effective.
CYTRX WARRANT
The CytRx Warrant, to be issued to CytRx upon consummation of the Merger
pursuant to the Agreement, provides that CytRx is entitled to purchase from
Vaxcel a number of shares of Vaxcel Common Stock equal to: (i) the amount that
the Board of Directors of CytRx reasonably determines is the minimum amount that
must be contributed to the capital of Vaxcel in order for Vaxcel to satisfy or
continue to satisfy quantitative requirements for inclusion or continued
inclusion of Vaxcel Common Stock in the Nasdaq SmallCap Market divided by (ii)
one-half of the Per Share Price and multiplied by (iii) the Exchange Ratio.
The per share price for the shares which may be purchased upon the exercise
of the CytRx Warrant (the "CytRx Warrant Exercise Price") shall be initially
equal to: (i) one-half of the Per Share Price, divided by (ii) the Exchange
Ratio, subject to adjustment pursuant to the terms of the CytRx Warrant for any
mergers, consolidations or reorganizations of Vaxcel. The CytRx Warrant may be
exercised by giving written notice to Vaxcel and providing Vaxcel with the CytRx
Warrant Exercise Price.
CytRx has the right to purchase shares of Vaxcel Common Stock under the
terms of the CytRx Warrant from the time that the CytRx Board reasonably
determines that Vaxcel's total assets and capital and surplus are insufficient
to satisfy the total assets and capital and surplus requirements for inclusion
of Vaxcel Common Stock in the Nasdaq SmallCap Market until December 6, 1997.
Pursuant to the CytRx Warrant, Vaxcel must provide written notice to CytRx
if: (i) Vaxcel declares any discretionary dividend upon any class of its capital
stock payable in securities or makes any special dividend or other distribution;
(ii) Vaxcel offers for subscription pro rata to the holders of any class of its
capital stock any additional securities of any class or other rights; (iii)
there shall be any capital reorganization, or reclassification of the capital
stock of Vaxcel, or consolidation or merger of Vaxcel with, or sale of all or
substantially all its assets or stock to, another corporation; (iv) Vaxcel
enters into a voluntary or involuntary dissolution, liquidation or winding-up of
Vaxcel; or (v) Vaxcel enters into an agreement or adopts a plan for the purpose
of effecting a consolidation, merger, or sale of all or substantially all of its
assets or stock, other than a merger where Vaxcel is the surviving corporation
and the terms of Vaxcel's capital stock remain unchanged. Such written notice
shall be given at least 30 days prior to the action in question if practicable
and not less than 30 days prior to the record date or the date on which Vaxcel's
transfer books are closed in respect thereto if practicable.
The CytRx Warrant and the shares of Vaxcel Common Stock that may be issued
upon exercise thereof have not been registered under the Securities Act, by
reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act pursuant to the exemption provided in Section
4(2) thereof, and have not been registered under state securities laws by reason
of their issuance in a transaction exempt from such registration requirements.
The CytRx Warrant may not be sold, transferred or otherwise disposed of unless
registered under the Securities Act and applicable state securities laws
registration.
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VAXCEL NON-FINANCING WARRANTS
Zynaxis issued the Zynaxis Non-Financing Warrants to Comdisco, Inc.
("Comdisco"), The UAB Research Foundation ("UAB") and Connecticut Mutual Life
Insurance Company ("Connecticut Mutual"). The Agreement provides that each such
warrant shall be converted into and become a Vaxcel Non-Financing Warrant, and
Vaxcel shall assume each such warrant in accordance with the terms of the
warrant agreement by which it is evidenced, except that from and after the
Effective Time, (i) each Zynaxis Non-Financing Warrant assumed by Vaxcel may be
exercised solely for shares of Vaxcel Common Stock, (ii) the number of shares of
Vaxcel Common Stock subject to such Vaxcel Non-Financing Warrant will be equal
to the number of shares of Zynaxis Common Stock subject to such Zynaxis
Non-Financing Warrant immediately prior to the Effective Time multiplied by the
Exchange Ratio, and (iii) the per share exercise price under each such Vaxcel
Non-Financing Warrant will be adjusted by dividing the per share exercise price
under each such Zynaxis Non-Financing Warrant by the Exchange Ratio and rounding
up to the nearest cent. Notwithstanding the provisions of clause (ii) of the
preceding sentence, Vaxcel will not be obligated to issue any fraction of a
share of Vaxcel Common Stock upon exercise of such Vaxcel Non-Financing Warrants
and any fraction of a share of Vaxcel Common Stock that otherwise would be
subject to a converted Vaxcel Non-Financing Warrant shall represent the right to
receive a cash payment upon exercise of such converted Vaxcel Non-Financing
Warrant equal to the product of such fraction and the difference between the
market value of one share of Vaxcel Common Stock at the time of exercise of such
converted Vaxcel Non-Financing Warrant and the per share exercise price of such
converted Vaxcel Non-Financing Warrant. The market value of one share of Vaxcel
Common Stock at the time of exercise of a converted Vaxcel Non-Financing Warrant
will be the last sale price of a share of Vaxcel Common Stock on the Nasdaq
SmallCap Market (as reported by the Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Vaxcel) on the last trading
day preceding the date of exercise.
Comdisco Warrants
The Zynaxis Non-Financing Warrants held by Comdisco are evidenced by a
Warrant Agreement dated as of December 14, 1988, and amended on March 4, 1989
and January 17, 1992, between Zynaxis and Comdisco (the "1988 Comdisco
Warrant"), and a Warrant Agreement dated as of November 9, 1990, and amended
January 17, 1992, between Zynaxis and Comdisco (the "1990 Comdisco Warrant").
The 1988 Comdisco Warrant grants Comdisco the right to purchase 8,955 shares of
Zynaxis Common Stock at an exercise price of $7.035 per share. The exercise
price may be paid in cash or by cancelling shares otherwise issuable under the
warrant with a fair market value equal to the exercise price. The term of the
1988 Comdisco Warrant began on December 1, 1988, and ends on December 1, 1998.
Comdisco has not purchased any shares under the warrant. The exercise price and
the number of shares of Zynaxis Common Stock subject to the warrant are subject
to adjustment in the event of a merger or sale of assets, reclassification of
shares, subdivision or combination of shares, or stock dividends. Comdisco has
limited registration rights with respect to the shares of Zynaxis Common Stock
issuable under the 1988 Comdisco Warrant.
The 1990 Comdisco Warrant grants Comdisco the right to purchase 2,459
shares of Zynaxis Common Stock at an exercise price of $7.035 per share. The
exercise price may be paid in cash or by cancelling shares otherwise issuable
under the warrant with a fair market value equal to the exercise price. The term
of the 1990 Comdisco Warrant began on November 9, 1990, and ends on November 9,
2000. Comdisco has not purchased any shares under the warrant. The exercise
price and the number of shares of Zynaxis Common Stock subject to the warrant
are subject to adjustment in the event of a merger or sale of assets,
reclassification of shares, subdivision or combination of shares, or stock
dividends. Comdisco has limited registration rights with respect to the shares
of Zynaxis Common Stock issuable under the 1990 Comdisco Warrant.
UAB Warrants
The Zynaxis Non-Financing Warrants held by UAB are evidenced by a Common
Stock and Warrant Purchase Agreement dated as of December 1, 1995, between
Zynaxis and UAB and related warrant agreement (the "UAB Warrant"). The UAB
Warrant grants UAB the right to purchase 200,000 share of Zynaxis Common Stock
at an exercise price of $1.325 per share. The term of the UAB Warrant begins on
the
94
<PAGE> 109
date of the first royalty payment which would otherwise be due to UAB under the
Agreement for Assignment of Royalties dated December 1, 1995, between UAB and
Zynaxis and ends on December 31, 2007; provided, however, that the term shall
terminate automatically 60 days after the Zynaxis Common Stock has traded at an
average closing price per share as reported on the Nasdaq National Market of
greater than $10 for any 30 consecutive trading days. UAB has not purchased any
shares under the warrant. The exercise price shall be increased or decreased as
appropriate, to avoid dilution of the exercise rights under the UAB Warrant in
the event of a dividend on Zynaxis Common Stock payable in such common stock, or
in any right to acquire Zynaxis Common Stock for any consideration less than the
exercise price, or a subdivision or a combination or consolidation (by reverse
stock split, reclassification or otherwise) of the Zynaxis Common Stock. In the
event of a reclassification, change, or consolidation of the Zynaxis Common
Stock, or the merger, sale or transfer of Zynaxis or its assets, the UAB Warrant
shall be converted into a new warrant that grants to UAB the right (upon terms
not less favorable to UAB than those set forth in the warrant) to purchase, in
lieu of Zynaxis Common Stock, the stock or other property that UAB would have
received had UAB exercised the warrant immediately prior to such transaction.
Subject to limited exceptions, Zynaxis is obligated to register for resale under
the Securities Act all of the Zynaxis Common Stock issued or issuable under the
warrant in the event that Zynaxis registers any of its other securities (other
than shares of Zynaxis Common Stock issued or issuable to holders of Zynaxis
Preferred Stock which are registered under the Preferred Stock and Warrant
Purchase Agreement dated March 29, 1995, as amended, among Zynaxis and certain
purchasers identified therein) under the Securities Act. Zynaxis shall pay all
expenses of such registration, other than selling commissions, underwriting fees
and stock transfer taxes applicable to the securities and all fees and
disbursements of counsel for UAB.
Connecticut Mutual Warrants
The Zynaxis Non-Financing Warrants held by Connecticut Mutual are evidenced
by a Common Stock and Warrant Purchase Agreement dated as of February 28, 1996,
between Zynaxis and Connecticut Mutual and related warrant agreement (the
"Connecticut Mutual Warrant"). The Connecticut Mutual Warrant grants Connecticut
Mutual the right to purchase 150,000 share of Zynaxis Common Stock at an
exercise price of $1.00 per share. The term of the Connecticut Mutual Warrant
began on November 28, 1996 and ends on February 28, 2001; provided, however,
that the term shall terminate automatically 60 days after the Zynaxis Common
Stock has traded at an average closing price per share as reported on the Nasdaq
SmallCap Market or the OTC Bulletin Board, as the case may be, of $3 or greater
for any 30 consecutive trading days. Connecticut Mutual has not purchased any
shares under the warrant. The exercise price shall be increased or decreased, as
appropriate, to avoid dilution of the exercise rights under the Connecticut
Mutual Warrant in the event of a dividend on Zynaxis Common Stock payable in
such common stock or in any right to acquire Zynaxis Common Stock for any
consideration less than the exercise price, or a subdivision or a combination or
consolidation (by reverse stock split, reclassification or otherwise) of the
Zynaxis Common Stock. In the event of a reclassification, change, or
consolidation of the Zynaxis Common Stock, or the merger, sale or transfer of
Zynaxis or its assets, the Connecticut Mutual Warrant shall be converted into a
new warrant that grants to Connecticut Mutual the right (upon terms not less
favorable to Connecticut Mutual than those set forth in the warrant) to
purchase, in lieu of Zynaxis Common Stock, the stock or other property that
Connecticut Mutual would have received had Connecticut Mutual exercised the
warrant immediately prior to such transaction. Zynaxis is obligated to file with
the SEC and use its best efforts to have declared effective and keep effective
for five years a registration statement on Form S-3 that includes shares of the
Zynaxis Common Stock issued or issuable under the warrant.
LEGAL MATTERS
Alston & Bird, counsel for Vaxcel, has delivered its opinion to the effect
that Vaxcel Common Stock to be issued to the holders of Zynaxis Capital Stock in
connection with the Merger, when issued as contemplated in the Agreement, will
be validly issued, fully paid, and nonassessable. In addition, Alston & Bird has
delivered its opinion concerning the federal income tax consequences of the
Merger. See "Description of Transaction -- Certain Federal Income Tax
Consequences." Certain other legal matters in connection with
95
<PAGE> 110
the Merger will be passed upon for Vaxcel by Alston & Bird and for Zynaxis by
Morgan, Lewis & Bockius LLP.
EXPERTS
The financial statements of Vaxcel at December 31, 1995 and 1994, and for
each of the two years in the period ended December 31, 1995, and for the period
from inception (January 6, 1993) through December 31, 1993, included in this
Proxy Statement and Registration Statement, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
The consolidated financial statements of Zynaxis incorporated by reference
in this Proxy Statement and elsewhere in the Registration Statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said report.
Reference is made to said report which includes an explanatory paragraph
regarding Zynaxis' ability to continue as a going concern.
OTHER MATTERS
As of the date of this Proxy Statement, the Zynaxis Board knows of no
matters that will be presented for consideration at the Special Meeting other
than as described in this Proxy Statement. However, if any other matters shall
properly come before the Special Meeting or any adjournment thereof and be voted
upon, the enclosed proxy shall be deemed to confer discretionary authority to
the individuals named as proxies therein to vote the shares represented by such
proxy as to any such matters.
96
<PAGE> 111
VAXCEL, INC.
INDEX TO FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors........................................................ F-2
Financial Statements:
Balance Sheets as of September 30, 1996 (unaudited) and December 31, 1995 and
1994............................................................................. F-3
Statements of Operations for the Nine Months Ended September 30, 1996 and 1995
(unaudited), for the Years Ended December 31, 1995 and 1994 and for the Period
from Inception (January 6, 1993) to December 31, 1993............................ F-4
Statements of Stockholder's Equity for the Period from Inception (January 6,
1993) to December 31, 1993, for the Years Ended December 31, 1994 and 1995 and
for the Nine Months Ended September 30, 1996 (unaudited)......................... F-5
Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995
(unaudited), for the Years Ended December 31, 1995 and 1994 and for the Period
from Inception (January 6, 1993) to December 31, 1993............................ F-6
Notes to Financial Statements.................................................... F-7
</TABLE>
F-1
<PAGE> 112
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
VAXCEL, INC.
We have audited the accompanying balance sheets of Vaxcel, Inc. as of
December 1995 and 1994, and the related statements of operations, stockholder's
equity and cash flows for the years then ended, and for the period from
inception (January 6, 1993) through December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Vaxcel, Inc. at December 31,
1995 and 1994, and the results of its operations and its cash flows for the
years then ended, and for the period from inception (January 6, 1993) through
December 31, 1993, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
February 19, 1996
F-2
<PAGE> 113
VAXCEL, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------------
1996 1995 1994
------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 18,832 $ 515,522 $ 527,948
Accounts receivable.............................. 6,363 5,038 67,615
Inventories...................................... -- -- 6,651
Other............................................ -- -- 300
------------ ----------- -----------
Total current assets........................ 25,195 520,560 602,514
Property and equipment:
Furnishings and equipment........................ 264,801 261,894 266,911
Leasehold improvements........................... -- -- 95,263
------------ ----------- -----------
264,801 261,894 362,174
Accumulated depreciation.............................. (156,725) (118,025) (86,768)
------------ ----------- -----------
Net property and equipment....................... 108,076 143,869 275,406
Other assets:
Patent costs..................................... -- -- 128,216
Deposits......................................... 35,674 37,439 37,439
------------ ----------- -----------
Total other assets.......................... 35,674 37,439 165,655
------------ ----------- -----------
Total assets................................ $ 168,945 $ 701,868 $ 1,043,575
============ =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable................................. $ 8,991 $ 61,386 $ 10,082
Accrued liabilities.............................. 40,516 41,896 35,771
Amounts due to CytRx Corporation................. 5,582 14,417 34,748
------------ ----------- -----------
Total current liabilities................... 55,089 117,699 80,601
Commitments
Stockholder's equity:
Preferred stock ($.001 par value, 2,000,000
shares authorized; no shares issued and
outstanding)................................... -- -- --
Common stock ($.001 par value, 30,000,000 shares
authorized; 8,200,000, 8,000,000, and 8,000,000
shares issued and outstanding at September 30,
1996, December 31, 1995, and December 31, 1994,
respectively).................................. 8,200 8,000 8,000
Additional paid-in capital....................... 4,297,800 3,998,000 2,998,000
Accumulated deficit.............................. (4,192,144) (3,421,831) (2,043,026)
------------ ----------- -----------
Total stockholder's equity.................. 113,856 584,169 962,974
------------ ----------- -----------
Total liabilities and stockholder's
equity.................................... $ 168,945 $ 701,868 $ 1,043,575
============ =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 114
VAXCEL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS ENDED YEAR ENDED INCEPTION
SEPTEMBER 30, DECEMBER 31, (JANUARY 6, 1993)
---------------------- ------------------------ THROUGH
1996 1995 1995 1994 DECEMBER 31, 1993
--------- --------- ----------- --------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Net sales......................... $ -- $ -- $ -- $ 500,814 $ 506,317
License fees...................... 50,000 25,000 115,000 -- --
Collaborative and grant revenue... 30,635 -- 6,709 -- --
--------- --------- ----------- --------- -----------
80,635 25,000 121,709 500,814 506,317
OPERATING EXPENSES:
Cost of sales..................... -- -- -- 72,636 74,066
Research and development.......... 540,744 559,965 894,754 570,548 791,996
Selling and marketing............. -- -- -- 181,542 444,512
General and administrative........ 316,663 364,794 534,542 664,359 583,291
Write-off of patent costs......... -- 128,216 128,216 -- --
--------- --------- ----------- --------- -----------
857,407 1,052,975 1,557,512 1,489,085 1,893,865
OTHER INCOME (EXPENSE):
Sale of animal adjuvant rights.... -- -- -- 500,000 --
Interest income................... 6,459 47,930 56,998 8,072 --
Interest expense.................. -- -- -- (119,644) (55,635)
--------- --------- ----------- --------- -----------
6,459 47,930 56,998 388,428 (55,635)
--------- --------- ----------- --------- -----------
Net loss.......................... $(770,313) $(980,045) $(1,378,805) $(599,843) $(1,443,183)
========= ========= =========== ========= ===========
Net loss per common share......... $ (0.10) $ (0.12) $ (0.17) $ (0.09) $ (0.24)
========= ========= =========== ========= ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 115
VAXCEL, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
SHARES ADDITIONAL ACCUMULATED
OUTSTANDING AMOUNT PAID-IN CAPITAL DEFICIT TOTAL
----------- ------ --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 6, 1993................. 6,000 $6,000 $ -- $ -- $ 6,000
Net loss............................... -- -- -- (1,443,183) (1,443,183)
---------- ------ ----------- ----------- -----------
Balance at December 31, 1993............... 6,000 6,000 -- (1,443,183) (1,437,183)
Conversion of CytRx note payable....... 2,000,000 2,000 2,998,000 -- 3,000,000
Net loss............................... -- -- -- (599,843) (599,843)
---------- ------ ----------- ----------- -----------
Balance at December 31, 1994............... 8,000,000 8,000 2,998,000 (2,043,026) 962,974
Capital contribution by CytRx.......... -- -- 1,000,000 -- 1,000,000
Net loss............................... -- -- -- (1,378,805) (1,378,805)
---------- ------ ----------- ----------- -----------
Balance at December 31, 1995............... 8,000,000 8,000 3,998,000 (3,421,831) 584,169
Issuance of stock to CytRx............. 200,000 200 299,800 300,000
Net loss (unaudited)................... -- -- -- (770,313) (770,313)
---------- ------ ----------- ----------- -----------
Balance at September 30, 1996
(unaudited).............................. 8,200,000 $8,200 $ 4,297,800 $ 4,192,144 $ 113,856
========== ====== =========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 116
VAXCEL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS ENDED YEAR ENDED INCEPTION
SEPTEMBER 30, DECEMBER 31, (JANUARY 6, 1993)
---------------------- ------------------------- THROUGH
1996 1995 1995 1994 DECEMBER 31, 1993
--------- --------- ----------- ---------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss.......................... $(770,313) $(980,045) $(1,378,805) $ (599,843) $(1,443,183)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and
amortization............... 38,700 54,789 70,084 69,468 17,648
Write-off to patent costs.... -- 128,216 128,216 -- --
Write-off of fixed assets.... -- -- 71,503 -- --
Change in assets and
liabilities:
Receivables.............. (1,325) 40,945 62,577 (1,538) 24,190
Inventories.............. -- 6,651 6,651 4,242 (4,181)
Other assets............. 1,765 (7,768) 300 (10,395) (155,908)
Accounts payable......... (53,746) (18,916) 36,328 (62,237) 88,646
Other liabilities........ (8,864) (22,029) 770 (291,272) 224,210
--------- --------- ----------- ---------- -----------
Total adjustments... (23,470) 181,888 376,429 (291,732) 194,605
--------- --------- ----------- ---------- -----------
Net cash used by operating
activities...................... (793,783) (798,157) (1,002,376) (891,575) (1,248,578)
Cash Flows From Investing Activities:
Capital expenditures, net......... (2,907) 4,295 (10,050) (63,527) (177,393)
Loans to officer.................. -- -- -- 96,600 (96,600)
Escrow account.................... -- -- -- 175,000 (175,000)
--------- --------- ----------- ---------- -----------
Net cash provided (used) by
investing activities............ (2,907) 4,295 (10,050) 208,073 (448,993)
Cash Flows From Financing Activities:
Borrowings on convertible note.... -- -- -- 1,171,027 1,731,994
Equity contribution by CytRx...... -- 1,000,000 1,000,000 -- --
Proceeds from sale of common
stock........................... 300,000 -- -- -- 6,000
--------- --------- ----------- ---------- -----------
Net cash provided by
financing activities............ 300,000 1,000,000 1,000,000 1,171,027 1,737,994
--------- --------- ----------- ---------- -----------
Net increase (decrease) in cash and
cash equivalents.................... (496,690) 206,138 (12,426) 487,525 40,423
Cash and cash equivalents at beginning
of period........................... 515,522 527,948 527,948 40,423 --
--------- --------- ----------- ---------- -----------
Cash and cash equivalents at end
of period........................... $ 18,832 $ 734,086 $ 515,522 $ 527,948 $ 40,423
========= ========= =========== ========== ===========
Supplemental Disclosure Of Information
Not Effecting Cash Flows:
Conversion of CytRx note payable
into common stock............... $ -- $ -- $ -- $3,000,000 $ --
========= ========= =========== ========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 117
VAXCEL, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (JANUARY 6, 1993) THROUGH DECEMBER 31, 1995
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND ANY DATE OR PERIOD
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
1. DESCRIPTION OF BUSINESS
Vaxcel, Inc. (the "Company") was formed on January 6, 1993 (date of
inception). The Company is a wholly-owned subsidiary of CytRx Corporation
("CytRx"). The Company is engaged in the development and commercialization of
proprietary vaccine delivery system technology to improve the effectiveness and
convenience of existing vaccines and contribute to the development of new
vaccines. The Company's core technology (the "OPTIVAX(R) System") is based upon
novel vaccine formulations containing certain biologically active copolymers
licensed exclusively for this purpose by the Company from CytRx.
The accompanying financial statements at September 30, 1996 and for the
nine months then ended are unaudited, but include all adjustments which the
Company's management believes to be necessary for a fair presentation of the
period presented. Interim results are not necessarily indicative of results for
a full year.
Since its inception the Company has incurred operating losses and has been
economically dependent upon CytRx to provide the funding necessary to conduct
its operations. CytRx has expressed its commitment to continue financial support
of the Company's operations as necessary at least through 1997, and has firmly
committed to provide a substantial level of capital funding subject to the
closure of the Merger transaction discussed in Note 10.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents -- The Company considers all highly liquid debt
instruments with an original maturity of 90 days or less to be cash equivalents.
Cash equivalents consist primarily of auction-market preferred stock, commercial
paper, and amounts invested in money market accounts.
Short-term Investments -- Management determines the appropriate
classification of debt securities at the time of purchase and reevaluates such
designation as of each balance sheet date. Debt securities are classified as
held-to-maturity when the Company has the positive intent and ability to hold
the securities to maturity. Held-to-maturity securities are stated at amortized
cost. Marketable equity securities and debt securities not classified as
held-to-maturity are classified as available-for-sale. Available-for-sale
securities are carried at fair value, with the unrealized gains and losses
reported in a separate component of stockholder's equity. Realized gains and
losses are included in investment income and are determined on a first-in,
first-out basis.
Inventories -- Inventories are valued at the lower of cost or market. Cost
is determined using the first-in, first-out method.
Property and Equipment -- Property and equipment are stated at cost and
depreciated using the straight-line method based on the estimated useful lives
of the related assets. Leasehold improvements are amortized over the remaining
term of the related lease using the straight-line method.
Patents and Patent Application Costs -- Prior to 1995, the Company
capitalized the costs associated with obtaining patents on its technologies.
During the first quarter of 1995 the Company changed from deferring and
amortizing such costs to recording them as expenses when incurred because, even
though the Company believes the patents and underlying technology have
continuing value, the amount of future benefits to be derived therefrom is
uncertain. Accordingly, the new accounting method has been adopted in
recognition of a possible change in estimated future benefits. Since the effect
of this change in accounting principle is inseparable from the effect of the
change in accounting estimate, such change has been accounted for as a change in
estimate in accordance with Opinion No. 20 of the Accounting Principles Board.
As a result, the
F-7
<PAGE> 118
VAXCEL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Company recorded a non-cash write-off of $128,216 during 1995 ($.02 per share).
Future patent costs are expected to be expensed since the benefits to be derived
therefrom are likely to be uncertain.
Fair Value of Financial Instruments -- The carrying amounts reported in the
balance sheets for cash and cash equivalents, accounts receivable and accounts
payable approximate their fair values.
Loss Per Common Share -- Loss per common share is based on the weighted
average number of common shares and common share equivalents outstanding during
each period. Stock options outstanding are excluded from the computation of net
loss per share since the effect is antidilutive.
Revenue Recognition -- Sales are recognized at the time the products are
shipped. License fees are recognized as income when they become receivable under
the terms of the related contracts, either by the passage of time or upon the
occurrence of certain events.
Stock Based Compensation -- The Company grants stock options for a fixed
number of shares to key employees, directors and consultants with an exercise
price equal to the fair market value of the shares at the date of grant. The
Company accounts for stock option grants in accordance with APB Opinion No. 25,
Accounting for Stock Issued to Employees, and, accordingly, recognizes no
compensation expense for the stock option grants (see Note 6).
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, Accounting for Stock-based Compensation, which provides an
alternative to APB Opinion No. 25 in accounting for stock-based compensation
issued to employees. However, the Company plans to continue to account for
stock-based compensation in accordance with APB Opinion No. 25.
Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
New Accounting Standard -- Statement of Financial Accounting Standards No.
121 ("SFAS 121") establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles and goodwill. This statement
was issued in 1995 and is required to be adopted January 1, 1996. The Company
will adopt SFAS 121 in the first quarter of 1996 and, based on current
circumstances, does not believe the effect of adoption will be material.
3. SHORT-TERM INVESTMENTS
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). In accordance with SFAS 115, the Company did
not restate prior period financial statements. There was no cumulative effect of
adopting SFAS 115.
At December 31, 1995, the Company has classified all of its short-term
investments as held-to-maturity. The costs of such short-term investments
totaling $399,000 at December 31, 1995, approximate their fair values and are
classified as cash equivalents in the accompanying balance sheets. There were no
short-term investments held at September 30, 1996 or December 31, 1994. The
contractual maturities of all securities held at December 31, 1995 are 90 days
or less.
Concentrations of Credit Risk -- Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist
principally of cash investments. The Company maintains cash equivalents and
short-term investments in large well-capitalized financial institutions, and the
Company's investment policy disallows investment in any debt securities rated
less than "investment-grade" by national ratings services.
F-8
<PAGE> 119
VAXCEL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. INVENTORIES
Inventories at December 31, 1994 consist of the following:
<TABLE>
<S> <C>
Finished goods.............................................................. $2,392
Raw materials............................................................... 4,259
------
Total..................................................................... $6,651
======
</TABLE>
5. LEASE COMMITMENTS
Rental expense under operating leases during the nine months ended
September 30, 1996 and 1995, and for the years ended 1995, 1994 and 1993
approximated $41,000, $32,000, $45,000, $40,000 and $3,000, respectively.
Minimum future obligations for operating leases are shown below. Aggregate
minimum rentals the Company expects to receive under noncancellable subleases
total approximately $144,000 at December 31, 1995.
<TABLE>
<S> <C>
1996...................................................................... $ 53,000
1997...................................................................... 55,000
1998...................................................................... 52,000
1999...................................................................... 3,000
--------
$163,000
========
</TABLE>
6. STOCK OPTIONS AND WARRANTS
In January 1993 the Company adopted a stock option plan (the "Plan") under
which 1,000,000 shares of the Company's common stock are reserved for grant.
Pursuant to the Plan, certain key employees, directors and consultants are
eligible to receive incentive and/or nonqualified stock options.
The options granted under the Plan have lives of ten years from the dates
of grant and generally become exercisable over a three year period from the
dates of grant, with the exception of certain options granted to the Company's
Chief Executive Officer and its Vice President of Research and Development,
which are subject to additional vesting criteria. Exercise prices are set at the
fair market values of the common stock on the dates of grant, as determined by
the Company's Board of Directors.
Stock option activity during the period from inception (January 6, 1993) to
September 30, 1996 was as follows:
<TABLE>
<CAPTION>
SHARES EXERCISE
UNDER OPTION PRICE
------------ ------------
<S> <C> <C>
Balance, January 6, 1993 (inception)....................... 0 $ 0
Granted............................................... 423,000 $1.75
---------- -----
Balance, December 31, 1993................................. 423,000 $1.75
Granted............................................... 127,000 $1.50 - 2.25
Canceled.............................................. (18,500) $1.75 - 2.25
---------- ------------
Balance, December 31, 1994................................. 531,500 $1.50
Granted............................................... 203,500 $1.50
---------- -----
Balance, December 31, 1995................................. 735,000 $1.50
Granted............................................... 32,120 $1.50
Canceled.............................................. (14,167) $1.50
---------- -----
Balance, September 30, 1996................................ 752,953 $1.50
========== =====
</TABLE>
F-9
<PAGE> 120
VAXCEL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCK OPTIONS AND WARRANTS -- (CONTINUED)
In December 1994, options as to 521,500 shares with exercise prices ranging
from $1.75 to $2.25 were repriced to $1.50. At December 31, 1995, options as to
95,498 shares were exercisable and options as to 265,000 shares were available
for future grants.
7. INCOME TAXES
For income tax purposes, as of December 31, 1995, the Company has an
aggregate of approximately $3,400,000 of net operating losses available to
offset against future taxable income, subject to certain limitations. Such
losses expire in 2008 through 2010. The Company also has an aggregate of
approximately $63,000 of research and development credits available for offset
against future income taxes which expire in 2008 through 2010.
Net deferred income tax assets of approximately $1,300,000 and $800,000
exist at December 31, 1995, and 1994, respectively, principally with respect to
the net operating losses. Based on assessments of all available evidence as of
those dates, management has concluded that the respective deferred income tax
assets should be reduced by valuation allowances equal to the amounts of the net
deferred income tax assets.
8. LICENSE AGREEMENTS
During 1995 the Company executed option agreements with Connaught
Laboratories, Inc. and Medeva PLC to evaluate the Company's OPTIVAX(R) vaccine
delivery system technology in combination with vaccines being developed by
Connaught and Medeva. In April 1996 the Company executed a definitive license
agreement with Corixa Corporation for use of OPTIVAX in combination with
vaccines being developed by Corixa. The Company has recognized $50,000, $25,000,
and $115,000 in revenues associated with these agreements during the nine months
ended September 30, 1996 and 1995, and the year ended December 31, 1995,
respectively.
9. RELATED PARTY TRANSACTIONS
Convertible Note
In January 1993 CytRx made available to the Company a revolving line of
credit pursuant to a convertible note agreement. The note accrued interest at
the prime rate plus two percentage points per annum. In August 1994 CytRx
converted the outstanding balance of the note plus interest ($3,000,000 in the
aggregate) into common stock of the Company at a price of $1.50 per share
(2,000,000 shares). Interest accrued pursuant to the note during 1994 and 1993
amounted to $119,644 and $55,718, respectively.
License Agreements
At inception, the Company obtained from CytRx through license agreements,
exclusive rights to Titermax(R) and the OPTIVAX(R) vaccine delivery system
technology. Royalties paid to CytRx pursuant to these agreements amounted to
$7,500, $0, $17,250, $49,476 and $49,482 during the nine months ended September
30, 1996 and 1995, and for the years ended December 31, 1995, 1994 and 1993,
respectively.
In December 1994, CytRx repurchased the rights to use of its vaccine
delivery technology in animals, including the rights to Titermax, for $500,000.
Net sales, cost of sales, and selling and marketing expense in the accompanying
Statements of Operations during 1993 and 1994 relate entirely to sales of
Titermax. The term of the remaining license to the OPTIVAX technology will
expire upon the later of ten years after the first commercial sale of products
covered by the license, or upon expiration of the last-to-expire patent covered
by the license.
F-10
<PAGE> 121
VAXCEL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. RELATED PARTY TRANSACTIONS -- (CONTINUED)
Supply Agreement
During the term of the related license agreement, CytRx agreed to supply
the Company with certain copolymers required in the manufacture and development
of the OPTIVAX vaccine delivery system. Amounts paid to CytRx for production of
copolymers were $10,923, $15,915, $15,915 and $9,500 during the nine months
ended September 30, 1996 and 1995, and during the years ended December 31, 1995
and 1994, respectively.
Services and Facilities Agreements
The Company entered into service and facilities agreements with CytRx and
Proceutics, Inc., another wholly-owned subsidiary of CytRx, whereby CytRx and
Proceutics provide the Company with office and laboratory space, certain
administrative and laboratory services, and the services of certain CytRx
executives. Pursuant to these agreements, the Company expensed a total of
$93,197, $81,446, $105,246, $79,823 and $315,429 during the nine months ended
September 30, 1996 and 1995, and during the years ended December 31, 1995, 1994
and 1993, respectively. Management believes that the methods used in allocating
these costs are reasonable and that such charges approximate the fair value of
the space and services provided.
10. SUBSEQUENT EVENTS
In December 1996 the Company, Vaxcel Merger Subsidiary, Inc. ("Vaxcel
Merger Sub"), a wholly owned subsidiary of Vaxcel, CytRx and Zynaxis signed an
agreement whereby Vaxcel Merger Sub will be merged into Zynaxis. Zynaxis is a
publicly-held company engaged in the development of certain vaccine
technologies. Under the terms of the agreement, all of the outstanding shares of
Zynaxis will be converted into shares of the Company based upon certain exchange
ratios defined in the agreement resulting in the issuance of an aggregate of
12.5% of the outstanding shares of Vaxcel common stock at the date of closing to
former Zynaxis stockholders. The Merger will be treated as a purchase and is
expected to constitute a tax-free reorganization for former Zynaxis
stockholders.
Pursuant to the agreement, CytRx will provide up to $2,000,000 to Zynaxis
under a secured credit facility during the period prior to the closing of the
Merger, at which time the outstanding principal and interest will be contributed
to the capital of Vaxcel, together with additional equity in the amount of
$4,000,000 less the outstanding principal and interest of the secured note.
It is anticipated that the proposed transaction will be submitted for the
approval of the Zynaxis stockholders in early 1997. The transaction is also
subject to effectiveness of a registration statement to be filed with the
Securities and Exchange Commission.
F-11
<PAGE> 122
APPENDIX A
AGREEMENT AND PLAN OF MERGER AND CONTRIBUTION
BY AND AMONG
CYTRX CORPORATION,
VAXCEL, INC.,
VAXCEL MERGER SUBSIDIARY, INC.,
AND
ZYNAXIS, INC.
DATED AS OF DECEMBER 6, 1996
A-1
<PAGE> 123
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PARTIES................................................................................ A-6
SECTION 351 PLAN....................................................................... A-6
ARTICLE 1 -- SUMMARY OF THE CONTRIBUTION AND THE MERGER................................ A-6
1.1 Contribution by CytRx...................................................... A-6
1.2 Issuance of Shares......................................................... A-7
1.3 Merger..................................................................... A-7
1.4 Time and Place of Closing.................................................. A-7
1.5 Effective Time............................................................. A-7
ARTICLE 2 -- TERMS OF MERGER AND MANAGEMENT AFTER THE MERGER........................... A-7
2.1 Charter.................................................................... A-7
2.2 Bylaws..................................................................... A-7
2.3 Directors and Officers of Surviving Corporation............................ A-7
2.4 Board of Directors of Vaxcel............................................... A-8
2.5 Officers of Vaxcel......................................................... A-8
ARTICLE 3 -- MANNER OF CONVERTING SHARES............................................... A-8
3.1 Conversion of Shares....................................................... A-8
3.2 Shares Held by Zynaxis or Vaxcel........................................... A-8
3.3 Dissenting Shareholders.................................................... A-8
3.4 Fractional Shares.......................................................... A-9
3.5 Conversion of Stock Options; Restricted Stock.............................. A-9
3.6 Conversion of Financing Warrants........................................... A-10
3.7 Conversion of Warrants Other Than Financing Warrants....................... A-10
3.8 Conversion of Promissory Notes............................................. A-11
ARTICLE 4 -- EXCHANGE OF SHARES........................................................ A-11
4.1 Exchange Procedures........................................................ A-11
4.2 Rights of Former Zynaxis Shareholders...................................... A-12
ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF ZYNAXIS................................. A-12
5.1 Organization, Standing, and Power.......................................... A-12
5.2 Authority; No Breach By Agreement.......................................... A-12
5.3 Capital Stock.............................................................. A-13
5.4 Zynaxis Subsidiaries....................................................... A-13
5.5 SEC Filings; Financial Statements.......................................... A-14
5.6 Absence of Undisclosed Liabilities......................................... A-14
5.7 Absence of Certain Changes or Events....................................... A-15
5.8 Tax Matters................................................................ A-15
5.9 Assets..................................................................... A-15
5.10 Intellectual Property...................................................... A-16
5.11 Environmental Matters...................................................... A-17
5.12 Compliance with Laws....................................................... A-17
5.13 Labor Relations............................................................ A-18
5.14 Employee Benefit Plans..................................................... A-18
5.15 Material Contracts......................................................... A-19
5.16 Legal Proceedings.......................................................... A-19
5.17 Reports.................................................................... A-20
5.18 Statements True and Correct................................................ A-20
5.19 Regulatory Matters......................................................... A-20
5.20 Charter Provisions......................................................... A-20
</TABLE>
A-2
<PAGE> 124
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF CYTRX, VAXCEL AND
VAXCEL MERGER SUB...................................................................... A-21
6.1 Organization, Standing, and Power.......................................... A-21
6.2 Authority; No Breach By Agreement.......................................... A-21
6.3 Capital Stock.............................................................. A-22
6.4 Vaxcel Subsidiaries........................................................ A-22
6.5 Vaxcel Financial Statements................................................ A-23
6.6 Absence of Undisclosed Liabilities......................................... A-23
6.7 Absence of Certain Changes or Events....................................... A-23
6.8 Tax Matters................................................................ A-23
6.9 Assets..................................................................... A-24
6.10 Intellectual Property...................................................... A-25
6.11 Environmental Matters...................................................... A-25
6.12 Compliance With Laws....................................................... A-25
6.13 Labor Relations............................................................ A-26
6.14 Employee Benefit Plans..................................................... A-26
6.15 Material Contracts......................................................... A-27
6.16 Legal Proceedings.......................................................... A-28
6.17 Reports.................................................................... A-28
6.18 Statements True and Correct................................................ A-28
6.19 Regulatory Matters......................................................... A-28
ARTICLE 7 -- CONDUCT OF BUSINESS PENDING CONSUMMATION.................................. A-29
7.1 Affirmative Covenants of Zynaxis........................................... A-29
7.2 Negative Covenants of Zynaxis.............................................. A-29
7.3 Covenants of Vaxcel........................................................ A-30
7.4 Adverse Changes in Condition............................................... A-30
7.5 Reports.................................................................... A-31
ARTICLE 8 -- ADDITIONAL AGREEMENTS..................................................... A-31
8.1 Registration Statement; Proxy Statement; Shareholder Approval.............. A-31
8.2 Applications............................................................... A-31
8.3 Filings with State Offices................................................. A-32
8.4 Agreement as to Efforts to Consummate...................................... A-32
8.5 Investigation and Confidentiality.......................................... A-32
8.6 Press Releases............................................................. A-32
8.7 Certain Actions............................................................ A-32
8.8 State Antitakeover Laws.................................................... A-33
8.9 Charter Provisions......................................................... A-33
8.10 Cure of Defaults........................................................... A-33
8.11 Negotiation of Malvern Lease Amendment..................................... A-33
8.12 Nasdaq Listing............................................................. A-33
8.13 Agreements of Affiliates................................................... A-33
8.14 Use of Proceeds of Senior Credit Facility.................................. A-34
8.15 Registration Rights Agreement.............................................. A-34
ARTICLE 9 -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE......................... A-34
9.1 Conditions to Obligations of Each Party.................................... A-34
9.2 Conditions to Obligations of CytRx, Vaxcel and Vaxcel Merger Sub........... A-35
9.3 Conditions to Obligations of Zynaxis....................................... A-36
</TABLE>
A-3
<PAGE> 125
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 10 -- TERMINATION.............................................................. A-37
10.1 Termination................................................................ A-37
10.2 Effect of Termination...................................................... A-38
10.3 Non-Survival of Representations and Covenants.............................. A-38
ARTICLE 11 -- MISCELLANEOUS............................................................ A-38
11.1 Definitions................................................................ A-38
11.2 Expenses................................................................... A-46
11.3 Brokers and Finders........................................................ A-47
11.4 Entire Agreement........................................................... A-48
11.5 Amendments................................................................. A-48
11.6 Waivers.................................................................... A-48
11.7 Assignment................................................................. A-48
11.8 Notices.................................................................... A-48
11.9 Governing Law.............................................................. A-49
11.10 Counterparts............................................................... A-49
11.11 Captions; Articles and Sections............................................ A-49
11.12 Interpretations............................................................ A-50
11.13 Severability............................................................... A-50
SIGNATURES............................................................................. A-50
</TABLE>
A-4
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LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- ------------------------------------------------------------------------------
<S> <C>
1. Warrant Agreement. (sec. 1.2).
2. Agreement of Affiliates. (sec. 8.13).
3. Matters as to which Morgan, Lewis & Bockius will opine. (sec. 9.2(d)).
4. Matters as to which Alston & Bird will opine. (sec. 9.3(d)).
5. Form of Charter Amendments. (sec. 11.1(a)).
6. Example of Calculation of Exchange Ratio. (sec. 11.1(a)).
7. Liquidation Agreement. (sec. 11.1(a)).
8. Note Exchange Agreement. (sec. 11.1(a)).
9. Preferred Stock and Warrant Agreement. (sec. 11.1(a)).
10. Registration Rights Agreement. (sec. 11.1(a)).
11. Secured Loan Agreement. (sec. 11.1(a)).
12. Senior Secured Note. (sec. 11.1(a)).
13. Shareholder Voting Agreement. (sec. 11.1(a)).
14. Technology Development Agreement. (sec. 11.1(a)).
15. Zynaxis Pledge Agreement. (sec. 11.1(a)).
16. Zynaxis Security Agreement. (sec. 11.1(a)).
17. Zynaxis Vaccine Technologies Collateral Assignment of License Agreement.
(sec. 11.1(a)).
18. Zynaxis Vaccine Technologies Guaranty. (sec. 11.1(a)).
19. Zynaxis Vaccine Technologies Security Agreement. (sec. 11.1(a)).
</TABLE>
A-5
<PAGE> 127
AGREEMENT AND PLAN OF MERGER AND CONTRIBUTION
THIS AGREEMENT AND PLAN OF MERGER AND CONTRIBUTION (this "Agreement") is
made and entered into as of December 6, 1996, by and among CYTRX CORPORATION
("CytRx"), a Delaware corporation, VAXCEL, INC.("Vaxcel"), a Delaware
corporation and a wholly owned subsidiary of CytRx, VAXCEL MERGER SUBSIDIARY,
INC. ("Vaxcel Merger Sub"), a Georgia corporation, and a newly formed, wholly
owned subsidiary of Vaxcel, and ZYNAXIS, INC. ("Zynaxis"), a Pennsylvania
corporation.
SECTION 351 PLAN
The respective Boards of Directors of CytRx, Vaxcel, Vaxcel Merger Sub and
Zynaxis are of the opinion that the transactions described herein are in the
best interests of the Parties to this Agreement and their respective
shareholders. This Agreement provides for the issuance to CytRx of shares of
Vaxcel Common Stock and a warrant to purchase shares of Vaxcel Common Stock in
exchange for CytRx's contribution to Vaxcel of the Senior Secured Note and an
amount of cash equal to the difference, as of the Closing Date, between the
aggregate principal and interest balance outstanding under the Senior Credit
Facility and Four Million Dollars ($4,000,000). This Agreement also provides for
the issuance of shares of Vaxcel Common Stock to the existing shareholders of
Zynaxis in exchange for the contribution to Vaxcel by the existing shareholders
of Zynaxis of all of the outstanding shares of Zynaxis Capital Stock by means of
a merger of Vaxcel Merger Sub with and into Zynaxis. At the Effective Time of
the Merger, the outstanding shares of the Zynaxis Capital Stock shall be
converted into the right to receive shares of Vaxcel Common Stock (except as
provided herein) and the outstanding shares of Vaxcel Merger Sub Common Stock
shall be converted into Zynaxis Common Stock. As a result, shareholders of
Zynaxis shall become shareholders of Vaxcel and Zynaxis shall continue to
conduct its business and operations as a wholly owned subsidiary of Vaxcel. The
transactions described in this Agreement are subject to the approval of the
shareholders of Zynaxis, and the satisfaction of certain other conditions
described in this Agreement. It is the intention of the Parties to this
Agreement that the transactions contemplated by this Agreement shall qualify for
federal income tax purposes for treatment under Section 351 of the Internal
Revenue Code. The execution of this Agreement by each of the Parties hereto
shall constitute its adoption by such Party.
Simultaneously with the execution of this Agreement: (i) CytRx is extending
the Senior Credit Facility to Zynaxis; (ii) CytRx and Zynaxis are entering into
a Liquidation Agreement pursuant to which CytRx will serve as Zynaxis's agent
and assist Zynaxis in selling its assets and settling its liabilities prior to
the Merger; (iii) holders of Zynaxis Preferred Stock, warrants and convertible
notes issued by Zynaxis are entering into agreements regarding the exchange of
their warrants and the exchange of their convertible notes for shares of Zynaxis
Common Stock in the Merger and certain other matters; and (iv) Vaxcel and
Zynaxis are entering into the Technology Development Agreement.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the Parties agree
as follows:
ARTICLE 1
SUMMARY OF THE CONTRIBUTION AND THE MERGER
1.1 Contribution by CytRx. For the consideration hereinafter provided and
subject to the terms and conditions of this Agreement, at the Closing, CytRx
shall contribute to Vaxcel the Senior Credit Facility and a cash payment (the
"Cash Payment") in an amount equal to the difference, as of the Closing Date,
between Four Million Dollars ($4,000,000) and the sum of: (i) the aggregate
principal and interest balance outstanding under the Senior Secured Note; and
(ii) (A) the Per Share Price multiplied by (B) the number of votes entitled to
be cast by the holders of Zynaxis Capital Stock who elect to exercise their
statutory dissenters' rights or their objection rights, if any, under Section
2545 of the PBCL in excess of three percent
A-6
<PAGE> 128
(3%) of the votes that could be cast by all holders of Zynaxis Capital Stock
voting together as a single class. The Cash Payment shall be made by wire
transfer of immediately available funds to an account specified in writing by
Vaxcel.
1.2 Issuance of Shares. Subject to the terms and conditions of this
Agreement, at the Closing, Vaxcel shall: (i) deliver to CytRx, in exchange for
the contribution of the Senior Secured Note and the Cash Payment, one warrant
agreement substantially in the form of Exhibit 1 hereto (the "CytRx Warrant")
and one certificate representing One Million Three Hundred Seventy Four Thousand
Nine Hundred Ninety-Six (1,374,996) shares of Vaxcel Common Stock; and (ii)
deliver to CytRx one certificate representing a number of shares of Vaxcel
Common Stock equal to the product of the Exchange Ratio, as defined below, times
the number of votes entitled to be cast by the holders of Zynaxis Capital Stock
who elect to exercise their statutory dissenters' rights or their objection
rights, if any, under Section 2545 of the PBCL. Each certificate of Vaxcel
Common Stock issued pursuant to this Section 1.2 shall be registered in the name
of CytRx, free and clear of any Liens.
1.3 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, Vaxcel Merger Sub shall be merged with and into Zynaxis in
accordance with the provisions of Section 1921 et seq. of the PBCL and Sections
14-2-1101 and 14-2-1107 of the GBCC and with the effects provided in Section
1929 of the PBCL and Section 14-2-1106 of the GBCC (the "Merger"). Zynaxis shall
be the Surviving Corporation resulting from the Merger and shall become a wholly
owned Subsidiary of Vaxcel and shall continue to be governed by the Laws of the
Commonwealth of Pennsylvania. The Merger shall be consummated pursuant to the
terms of this Agreement, which has been approved and adopted by the respective
Boards of Directors of CytRx, Zynaxis, Vaxcel Merger Sub, and Vaxcel and by
Vaxcel, as the sole shareholder of Vaxcel Merger Sub.
1.4 Time and Place of Closing. The closing of the transactions
contemplated hereby (the "Closing") will take place at 10:00 A.M. on the date on
which the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 10:00 A.M.), or at such other time as the
Parties, acting through their authorized officers, may mutually agree. The
Closing shall be held at such location as may be mutually agreed upon by the
Parties.
1.5 Effective Time. The Merger and other transactions contemplated by this
Agreement shall become effective upon the last to occur of: (i) the filing of
the Articles of Merger in the Department of State of the Commonwealth of
Pennsylvania and (ii) the filing of the Certificate of Merger with the Secretary
of State of the State of Georgia (the "Effective Time"). Subject to the terms
and conditions hereof, unless otherwise mutually agreed upon in writing by the
authorized officers of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time to occur on the first business day following
the last to occur of (i) the effective date (including expiration of any
applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger, and (ii)
the date on which the shareholders of Zynaxis approve this Agreement to the
extent such approval is required by applicable Law.
ARTICLE 2
TERMS OF MERGER AND
MANAGEMENT AFTER THE MERGER
2.1 Charter. The Articles of Incorporation, as amended, of Zynaxis in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until duly amended or repealed.
2.2 Bylaws. The Bylaws of Zynaxis in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended or repealed.
2.3 Directors and Officers of Surviving Corporation. Jack L. Bowman,
Raymond C. Carnahan, Jr., Jack J. Luchese, Herbert H. McDade, Jr., and Paul
Wilson shall serve as the directors of the Surviving
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<PAGE> 129
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation until their successors are elected and qualify. The
following persons shall serve as the officers of the Surviving Corporation from
and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation until their successors are elected and qualify: Paul Wilson,
President and Chief Executive Officer; Mark Newman, Vice President -- Research
and Development; and Mark W. Reynolds, Chief Financial Officer, Controller and
Secretary.
2.4 Board of Directors of Vaxcel. Jack L. Bowman, Raymond C. Carnahan,
Jr., Lyle A. Hohnke, Jack J. Luchese, Herbert H. McDade, Jr., and Paul Wilson
shall serve as the directors of Vaxcel from and after the Effective Time in
accordance with the Bylaws of Vaxcel until their successors are elected and
qualify.
2.5 Officers of Vaxcel. The officers of Vaxcel in office immediately prior
to the Effective Time, together with such additional persons as may thereafter
be elected, shall serve as the officers of Vaxcel from and after the Effective
Time in accordance with the Bylaws of Vaxcel until their successors are elected
and qualify.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of Vaxcel, Vaxcel Merger Sub or Zynaxis, or the shareholders of any of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of capital stock of Vaxcel issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of Vaxcel Merger Sub Common Stock issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into one share of Zynaxis Common Stock.
(c) Each share of Zynaxis Common Stock (excluding shares held by any
Zynaxis Company or any Vaxcel Company, and excluding shares held by
shareholders who perfect their statutory dissenters' rights or objection
rights under Section 2545 of the PBCL as provided in Section 3.3) issued
and outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for the right to
receive a number of shares of Vaxcel Common Stock equal to two times the
Exchange Ratio.
(d) Each share of Zynaxis Preferred Stock (excluding shares held by
any Zynaxis Company or any Vaxcel Company, and excluding shares held by
shareholders who perfect their statutory dissenters' rights or objection
rights under Section 2545 of the PBCL as provided in Section 3.3) issued
and outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for the right to
receive a number of shares of Vaxcel Common Stock equal to two times the
Exchange Ratio.
3.2 Shares Held by Zynaxis or Vaxcel. Each of the shares of Zynaxis Common
Stock held by any Zynaxis Company or by any Vaxcel Company shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.3 Dissenting Shareholders.
(a) Any holder of shares of Zynaxis Capital Stock who perfects his or her
dissenters' rights in accordance with and as contemplated by Section 1930 of the
PBCL shall be entitled to receive the value of such shares in cash as determined
pursuant to such provision of Law; provided, that no such payment shall be made
to any dissenting shareholder unless and until such dissenting shareholder has
complied with the applicable provisions of the PBCL and surrendered to Zynaxis
the certificate or certificates representing the shares for which payment is
being made. In the event that after the Effective Time a dissenting shareholder
of Zynaxis fails to perfect, or effectively withdraws or loses, his right to
appraisal and of payment for his shares, Vaxcel shall issue and deliver the
consideration to which such holder of shares of Zynaxis Capital Stock is
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<PAGE> 130
entitled under this Article 3 (without interest) upon surrender by such holder
of the certificate or certificates representing shares of Zynaxis Capital Stock
held by him. If and to the extent required by applicable Law, Vaxcel will
establish (or cause to be established) an escrow account with an amount
sufficient to satisfy the maximum aggregate payment that may be required to be
paid to dissenting shareholders. Upon satisfaction of all claims of dissenting
shareholders, the remaining escrowed amount, reduced by payment of the fees and
expenses of the escrow agent, will be returned to Vaxcel.
(b) Any holder of shares of Zynaxis Capital Stock who objects to the
transaction and in accordance with and as contemplated by Sections 2544 and 2546
of the PBCL shall be entitled to receive the value of such shares in cash as
determined pursuant to such provision of Law; provided, that no such payment
shall be made to any objecting shareholder unless and until such objecting
shareholder has complied with the applicable provisions of the PBCL and
surrendered to Zynaxis the certificate or certificates representing the shares
for which payment is being made. In the event that after the Effective Time an
objecting shareholder of Zynaxis fails to give proper notice and surrender his
certificates as required by Section 2547 of the PBCL, or otherwise effectively
withdraws or loses his right to appraisal and of payment for his shares, Vaxcel
shall issue and CytRx and Vaxcel shall deliver the consideration to which such
holder of shares of Zynaxis Capital Stock is entitled under this Article 3
(without interest) upon surrender by such holder of the certificate or
certificates representing shares of Zynaxis Capital Stock held by him. If and to
the extent required by applicable Law, Vaxcel will establish (or cause to be
established) an escrow account with an amount sufficient to satisfy the maximum
aggregate payment that may be required to be paid to objecting shareholders.
Upon satisfaction of all claims of objecting shareholders, the remaining
escrowed amount, reduced by payment of the fees and expenses of the escrow
agent, will be returned to Vaxcel.
3.4 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Zynaxis Common Stock and each holder of
shares of Zynaxis Preferred Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Vaxcel Common
Stock (after taking into account all whole shares delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of Vaxcel Common Stock divided by the Exchange
Ratio and multiplied by the Per Share Price.
3.5 Conversion of Stock Options; Restricted Stock.
(a) At the Effective Time, each option or other Equity Right to purchase
shares of Zynaxis Common Stock pursuant to stock options or stock appreciation
rights ("Zynaxis Options") granted by Zynaxis under the Zynaxis Stock Plan which
are outstanding at the Effective Time, whether or not exercisable, shall be
converted into and become rights with respect to Vaxcel Common Stock, and Vaxcel
shall assume each Zynaxis Option, in accordance with the terms of the Zynaxis
Stock Plan and stock option agreement by which it is evidenced, except that from
and after the Effective Time, (i) Vaxcel and its Compensation Committee shall be
substituted for Zynaxis and the Committee of Zynaxis's Board of Directors
(including, if applicable, the entire Board of Directors of Zynaxis)
administering such Zynaxis Stock Plan, (ii) each Zynaxis Option assumed by
Vaxcel may be exercised solely for shares of Vaxcel Common Stock (or cash, if so
provided under the terms of such Zynaxis Option), (iii) the number of shares of
Vaxcel Common Stock subject to such Zynaxis Option shall be equal to the number
of shares of Zynaxis Common Stock subject to such Zynaxis Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, and (iv) the per
share exercise price under each such Zynaxis Option shall be adjusted by
dividing the per share exercise price under each such Zynaxis Option by the
Exchange Ratio and rounding up to the nearest cent. Notwithstanding the
provisions of clause (iii) of the preceding sentence, Vaxcel shall not be
obligated to issue any fraction of a share of Vaxcel Common Stock upon exercise
of Zynaxis Options and any fraction of a share of Vaxcel Common Stock that
otherwise would be subject to a converted Zynaxis Option shall represent the
right to receive a cash payment upon exercise of such converted Zynaxis Option
equal to the product of such fraction and the difference between the market
value of one share of Vaxcel Common Stock at the time of exercise of such Option
and the per share exercise price of such Zynaxis Option. The market value of one
share of Vaxcel Common Stock at the time of exercise of an Option shall be the
last sale price of a share of Vaxcel Common Stock on the Nasdaq SmallCap Market
(as reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by Vaxcel) on the last trading day preceding the
date of exercise. In
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addition, notwithstanding the provisions of clauses (iii) and (iv) of the first
sentence of this Section 3.5, each Zynaxis Option which is an "incentive stock
option" shall be adjusted as required by Section 424 of the Internal Revenue
Code, and the regulations promulgated thereunder, so as not to constitute a
modification, extension or renewal of the option, within the meaning of Section
424(h) of the Internal Revenue Code. Each of Zynaxis and Vaxcel agrees to take
all necessary steps to effectuate the foregoing provisions of this Section 3.5,
including using its reasonable efforts to obtain from each holder of a Zynaxis
Option any Consent or Contract that may be deemed necessary or advisable in
order to effect the transactions contemplated by this Section 3.5. Anything in
this Agreement to the contrary notwithstanding, Vaxcel shall have the right, in
its sole discretion, not to deliver the consideration provided in this Section
3.5 to a former holder of a Zynaxis Option who has not delivered such Consent or
Contract.
(b) As soon as practicable after the Effective Time, Vaxcel shall deliver
to the participants in the Zynaxis Stock Plan an appropriate notice setting
forth such participant's rights pursuant thereto and the grants subject to the
Zynaxis Stock Plan shall continue in effect on the same terms and conditions
(subject to the adjustments required by Section 3.5(a) after giving effect to
the Merger), and Vaxcel shall comply with the terms of the Zynaxis Stock Plan to
ensure, to the extent required by, and subject to the provisions of, such
Zynaxis Stock Plan, that Zynaxis Options which qualified as incentive stock
options prior to the Effective Time continue to qualify as incentive stock
options after the Effective Time. At or prior to the Effective Time, Vaxcel
shall take all corporate action necessary to reserve for issuance sufficient
shares of Vaxcel Common Stock for delivery upon exercise of Zynaxis Options
assumed by it in accordance with this Section 3.5. As soon as practicable after
the Effective Time, Vaxcel shall file a registration statement on Form S-3 or
Form S-8, as the case may be (or any successor or other appropriate forms), with
respect to the shares of Vaxcel Common Stock subject to such options and shall
use its reasonable efforts to maintain the effectiveness of such registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding.
(c) All contractual restrictions or limitations on transfer with respect to
Zynaxis Common Stock awarded under the Zynaxis Stock Plan or any other plan,
program, Contract or arrangement of any Zynaxis Company, to the extent that such
restrictions or limitations shall not have already lapsed (whether as a result
of the Merger or otherwise), and except as otherwise expressly provided in such
plan, program, Contract or arrangement, shall remain in full force and effect
with respect to shares of Vaxcel Common Stock into which such restricted stock
is converted pursuant to Section 3.1.
3.6 Conversion of Financing Warrants. At the Effective Time, each warrant
to purchase shares of Zynaxis Common Stock which is outstanding at the Effective
Time and is held by a party to the Preferred Stock and Warrant Agreement shall
be exchanged for a warrant to purchase Vaxcel Common Stock in accordance with
the terms of the Preferred Stock and Warrant Agreement.
3.7 Conversion of Warrants Other Than Financing Warrants. At the Effective
Time, each warrant to purchase shares of Zynaxis Common Stock which is
outstanding at the Effective Time and is not being exchanged for a warrant to
purchase Vaxcel Common Stock in accordance with Section 3.6 and pursuant to the
Preferred Stock and Warrant Agreement (a "Non-Financing Warrant") shall be
converted into and become a warrant to purchase shares of Vaxcel Common Stock,
and Vaxcel shall assume each such warrant, in accordance with the terms of the
warrant agreement by which it is evidenced, except that from and after the
Effective Time, (i) each Non-Financing Warrant assumed by Vaxcel may be
exercised solely for shares of Vaxcel Common Stock, (ii) the number of shares of
Vaxcel Common Stock subject to such Non-Financing Warrant shall be equal to the
number of shares of Zynaxis Common Stock subject to such Non-Financing Warrant
immediately prior to the Effective Time multiplied by the Exchange Ratio, and
(iii) the per share exercise price under each such Non-Financing Warrant shall
be adjusted by dividing the per share exercise price under each such
Non-Financing Warrant by the Exchange Ratio and rounding up to the nearest cent.
Notwithstanding the provisions of clause (ii) of the preceding sentence, Vaxcel
shall not be obligated to issue any fraction of a share of Vaxcel Common Stock
upon exercise of such Non-Financing Warrants and any fraction of a share of
Vaxcel Common Stock that otherwise would be subject to a converted Non-Financing
Warrant shall represent the right to receive a cash payment upon exercise of
such converted Non-Financing Warrant equal to the product of such fraction and
the difference between the market value of one share of
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Vaxcel Common Stock at the time of exercise of such converted Non-Financing
Warrant and the per share exercise price of such converted Non-Financing
Warrant. The market value of one share of Vaxcel Common Stock at the time of
exercise of a converted Non-Financing Warrant shall be the last sale price of a
share of Vaxcel Common Stock on the Nasdaq SmallCap Market (as reported by The
Wall Street Journal or, if not reported thereby, any other authoritative source
selected by Vaxcel) on the last trading day preceding the date of exercise.
(b) As soon as practicable after the Effective Time, Vaxcel shall deliver
to the holders of Non-Financing Warrants an appropriate notice setting forth
such participant's rights pursuant thereto and the converted Non-Financing
Warrants shall continue in effect on the same terms and conditions (subject to
the adjustments required by Section 3.7(a) after giving effect to the Merger).
At or prior to the Effective Time, Vaxcel shall take all corporate action
necessary to reserve for issuance sufficient shares of Vaxcel Common Stock for
delivery upon exercise of converted Non-Financing Warrants assumed by it in
accordance with this Section 3.7.
3.8 Conversion of Promissory Notes. At the Effective Time, each promissory
note on which Zynaxis is the obligor and which is held by a party to the Note
Exchange Agreement shall be exchanged for shares of Vaxcel Common Stock in
accordance with the terms of the Note Exchange Agreement.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Vaxcel and
Zynaxis shall cause the exchange agent selected by Vaxcel (the "Exchange Agent")
to mail to each holder of record of a certificate or certificates which
represented shares of Zynaxis Capital Stock immediately prior to the Effective
Time (the "Certificates") appropriate transmittal materials and instructions
(which shall specify that delivery shall be effected, and risk of loss and title
to such Certificates shall pass, only upon proper delivery of such Certificates
to the Exchange Agent). The Certificate or Certificates of Zynaxis Capital Stock
so delivered shall be duly endorsed as the Exchange Agent may require. In the
event of a transfer of ownership of shares of Zynaxis Capital Stock represented
by Certificates that are not registered in the transfer records of Zynaxis, the
consideration provided in Section 3.1 may be issued to a transferee if the
Certificates representing such shares are delivered to the Exchange Agent,
accompanied by all documents required to evidence such transfer and by evidence
satisfactory to the Exchange Agent that any applicable stock transfer taxes have
been paid. If any Certificate shall have been lost, stolen, mislaid or
destroyed, upon receipt of (i) an affidavit of that fact from the holder
claiming such Certificate to be lost, mislaid, stolen or destroyed, (ii) such
bond, security or indemnity as Vaxcel and the Exchange Agent may reasonably
require and (iii) any other documents necessary to evidence and effect the bona
fide exchange thereof, the Exchange Agent shall issue to such holder the
consideration into which the shares represented by such lost, stolen, mislaid or
destroyed Certificate shall have been converted. The Exchange Agent may
establish such other reasonable and customary rules and procedures in connection
with its duties as it may deem appropriate. After the Effective Time, each
holder of shares of Zynaxis Capital Stock (other than shares to be canceled
pursuant to Section 3.2, or as to which statutory dissenters' rights have been
perfected as provided in Section 3.3(a), or as to which proper notice has been
given as provided in Section 3.3(b)) issued and outstanding at the Effective
Time shall surrender the Certificate or Certificates representing such shares to
the Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the consideration provided in Section 3.1, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2. To the extent required by Section
3.4, each holder of shares of Zynaxis Capital Stock issued and outstanding at
the Effective Time also shall receive, upon surrender of the Certificate or
Certificates, cash in lieu of any fractional share of Vaxcel Common Stock to
which such holder may be otherwise entitled (without interest). Vaxcel shall not
be obligated to deliver the consideration to which any former holder of Zynaxis
Capital Stock is entitled as a result of the Merger until such holder surrenders
such holder's Certificate or Certificates for exchange as provided in this
Section 4.1. Any other provision of this Agreement notwithstanding, neither
Vaxcel, the Surviving Corporation nor the Exchange Agent shall be liable to a
holder of Zynaxis Capital Stock
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for any amounts paid or property delivered in good faith to a public official
pursuant to any applicable abandoned property, escheat or similar Law. Adoption
of this Agreement by the shareholders of Zynaxis shall constitute ratification
of the appointment of the Exchange Agent.
4.2 Rights of Former Zynaxis Shareholders. At the Effective Time, the
stock transfer books of Zynaxis shall be closed as to holders of Zynaxis Capital
Stock immediately prior to the Effective Time and no transfer of Zynaxis Capital
Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 4.1, each
Certificate theretofore representing shares of Zynaxis Capital Stock (other than
shares to be canceled pursuant to Section 3.2, or as to which statutory
dissenters' rights have been perfected as provided in Section 3.3(a), or as to
which proper notice has been given as provided in Section 3.3(b)) shall from and
after the Effective Time represent for all purposes only the right to receive
the consideration provided in Sections 3.1 and 3.4 in exchange therefor,
subject, however, to the Surviving Corporation's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
which have been declared or made by Zynaxis in respect of such shares of Zynaxis
Capital Stock in accordance with the terms of this Agreement and which remain
unpaid at the Effective Time. To the extent permitted by Law, former
shareholders of record of Zynaxis shall be entitled to vote after the Effective
Time at any meeting of Vaxcel shareholders the number of whole shares of Vaxcel
Common Stock into which their respective shares of Zynaxis Capital Stock are
converted, regardless of whether such holders have exchanged their Certificates
for certificates representing Vaxcel Common Stock in accordance with the
provisions of this Agreement. Whenever a dividend or other distribution is
declared by Vaxcel on the Vaxcel Common Stock, the record date for which is at
or after the Effective Time, the declaration shall include dividends or other
distributions on all shares of Vaxcel Common Stock issuable pursuant to this
Agreement, but beginning 30 days after the Effective Time no dividend or other
distribution payable to the holders of record of Vaxcel Common Stock as of any
time subsequent to the Effective Time shall be delivered to the holder of any
Certificate until such holder surrenders such Certificate for exchange as
provided in Section 4.1. However, upon surrender of such Certificate, both the
Vaxcel Common Stock certificate (together with all such undelivered dividends or
other distributions without interest) and any undelivered dividends and cash
payments payable hereunder (without interest) shall be delivered and paid with
respect to each share represented by such Certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ZYNAXIS
Zynaxis hereby represents and warrants to Vaxcel as follows:
5.1 Organization, Standing, and Power. Zynaxis is a corporation duly
organized, validly existing, and in good standing under the Laws of the
Commonwealth of Pennsylvania, and has the corporate power and authority to carry
on its business as now conducted and to own, lease and operate its Assets.
Zynaxis is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Zynaxis. The minute book and other organizational documents for
Zynaxis have been made available to Vaxcel for its review and, except as
disclosed in Section 5.1 of the Zynaxis Disclosure Memorandum, are true and
complete in all material respects as of the date of this Agreement and
accurately reflect in all material respects all amendments thereto and all
proceedings of the Board of Directors and shareholders thereof.
5.2 Authority; No Breach By Agreement.
(a) Zynaxis has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Zynaxis, subject to the
adoption of this Agreement: (i) by a majority vote of the votes
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cast by all shareholders entitled to vote thereon (the holders of shares of
Zynaxis Common Stock and the holders of shares of Zynaxis Preferred Stock,
voting on an as-converted basis), and (ii) by a majority of the votes cast by
all holders of Zynaxis Preferred Stock entitled to vote thereon, voting as a
class. These are the only shareholder votes required for approval of this
Agreement and consummation of the transactions contemplated herein, including
the Merger, by Zynaxis. Subject to approval of this Agreement by the
shareholders of Zynaxis, this Agreement represents a legal, valid, and binding
obligation of Zynaxis, enforceable against Zynaxis in accordance with its terms.
(b) The execution and delivery of this Agreement by Zynaxis, and, upon
approval of this Agreement and the transactions contemplated hereby by the
shareholders of Zynaxis, the consummation by Zynaxis of the transactions
contemplated hereby and the compliance by Zynaxis with any of the provisions
hereof, will not (i) conflict with or result in a breach of any provision of
Zynaxis's Articles of Incorporation, as amended, or Bylaws or the certificate or
articles of incorporation or bylaws of any Zynaxis Subsidiary or any resolution
adopted by the board of directors or the shareholders of any Zynaxis Company, or
(ii) except as disclosed in Section 5.2 of the Zynaxis Disclosure Memorandum,
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any Zynaxis Company under,
any Contract or Permit of any Zynaxis Company, or, (iii) subject to receipt of
the requisite Consents referred to in Section 9.1(b), constitute or result in a
Default under, or require any Consent pursuant to, any Law or Order applicable
to any Zynaxis Company or any of their respective material Assets (including any
Vaxcel Company or any Zynaxis Company becoming subject to or liable for the
payment of any Tax or any of the Assets owned by any Vaxcel Company or any
Zynaxis Company being reassessed or revalued by any Taxing authority).
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
no notice to, filing with, or Consent of, any public body or authority is
necessary for the execution, delivery and performance by Zynaxis of its
obligations under this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of Zynaxis consists of (i) 25,000,000
shares of Zynaxis Common Stock, of which 10,338,768 shares are issued and
outstanding, and (ii) 2,000,000 shares of preferred stock, 1,500,000 shares of
which are designated Series A Convertible Preferred Stock and of which 1,412,500
shares are issued and outstanding. The Conversion Price (as that term is defined
in the Statement With Respect to Shares) of the Zynaxis Preferred Stock is One
Dollar ($1.00) per share. All of the issued and outstanding shares of capital
stock of Zynaxis are duly and validly issued and outstanding and are fully paid
and nonassessable under the PBCL. None of the outstanding shares of Zynaxis
Capital Stock has been issued in violation of any preemptive rights of the
current or past shareholders of Zynaxis.
(b) Except as set forth in Section 5.3(a) or as disclosed in Section 5.3 of
the Zynaxis Disclosure Memorandum, there are no shares of capital stock or other
equity securities of Zynaxis outstanding and no outstanding Equity Rights
relating to the Zynaxis Capital Stock.
5.4 Zynaxis Subsidiaries. Zynaxis has disclosed in Section 5.4 of the
Zynaxis Disclosure Memorandum all of the Zynaxis Subsidiaries (in each case
identifying its jurisdiction of incorporation, each jurisdiction in which it is
qualified and/or licensed to transact business, and the number of shares owned
by Zynaxis and percentage ownership interest represented by such share
ownership). Except as disclosed in Section 5.4 of the Zynaxis Disclosure
Memorandum, Zynaxis or one of its Subsidiaries owns all of the issued and
outstanding shares of capital stock (or other equity interests) of each Zynaxis
Subsidiary. No capital stock (or other equity interest) of any Zynaxis
Subsidiary is or may become required to be issued (other than to another Zynaxis
Company) by reason of any Equity Rights, and there are no Contracts by which any
Zynaxis Subsidiary is bound to issue (other than to another Zynaxis Company)
additional shares of its capital stock (or other equity interests) or Equity
Rights or by which any Zynaxis Company is or may be bound to transfer any shares
of the capital stock (or other equity interests) of any Zynaxis Subsidiary
(other than to another Zynaxis Company). There are no Contracts relating to the
rights of any Zynaxis Company to vote or to dispose of any shares of the
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capital stock (or other equity interests) of any Zynaxis Subsidiary. All of the
shares of capital stock (or other equity interests) of each Zynaxis Subsidiary
held by a Zynaxis Company are fully paid and nonassessable under the applicable
corporation Law of the jurisdiction in which such Subsidiary is incorporated or
organized and are owned by the Zynaxis Company free and clear of any Lien,
except as contemplated in the Transaction Documents. Except as disclosed in
Section 5.4 of the Zynaxis Disclosure Memorandum, each Zynaxis Subsidiary is a
corporation, and each such Subsidiary is duly organized, validly existing, and
(as to corporations) in good standing under the Laws of the jurisdiction in
which it is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease, and operate its Assets and to carry on its
business as now conducted. Each Zynaxis Subsidiary is duly qualified or licensed
to transact business as a foreign corporation in good standing in the States of
the United States and foreign jurisdictions where the character of its Assets or
the nature or conduct of its business requires it to be so qualified or
licensed, except for such jurisdictions in which the failure to be so qualified
or licensed is not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Zynaxis. The minute book and other organizational
documents for each Zynaxis Subsidiary have been made available to Vaxcel for its
review, and, except as disclosed in Section 5.4 of the Zynaxis Disclosure
Memorandum, are true and complete in all material respects as in effect as of
the date of this Agreement and accurately reflect in all material respects all
amendments thereto and all proceedings of the Board of Directors and
shareholders thereof.
5.5 SEC Filings; Financial Statements.
(a) Zynaxis has timely filed and made available to Vaxcel all SEC Documents
required to be filed by Zynaxis since December 31, 1992 (the "Zynaxis SEC
Reports"). The Zynaxis SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Laws and
(ii) did not, at the time they were filed (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such Zynaxis SEC Reports or necessary in order to make
the statements in such Zynaxis SEC Reports, in light of the circumstances under
which they were made, not misleading. No Zynaxis Subsidiary is required to file
any SEC Documents.
(b) Each of the Zynaxis Financial Statements (including, in each case, any
related notes) contained in the Zynaxis SEC Reports, including any Zynaxis SEC
Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited interim statements, as permitted by Form 10-Q of
the SEC), and fairly presented in all material respects the consolidated
financial position of Zynaxis and its Subsidiaries as at the respective dates
and the consolidated results of operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount or effect.
5.6 Absence of Undisclosed Liabilities. Except as disclosed in Section 5.6
of the Zynaxis Disclosure Memorandum, no Zynaxis Company has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Zynaxis, except Liabilities which are accrued or reserved
against in the consolidated balance sheets of Zynaxis as of December 31, 1995
and June 30, 1996, included in the Zynaxis Financial Statements delivered prior
to the date of this Agreement or reflected in the notes thereto. Except as
disclosed in Section 5.6 of the Zynaxis Disclosure Memorandum, no Zynaxis
Company has incurred or paid any Liability since June 30, 1996, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Zynaxis or (ii)
in connection with the transactions contemplated by this Agreement. Except as
disclosed in Section 5.6 of the Zynaxis Disclosure Memorandum or in the Zynaxis
Financial Statements, no Zynaxis Company is directly or indirectly liable, by
guarantee, indemnity, or otherwise, upon or with respect to, or obligated, by
discount or repurchase agreement or in any other way, to provide funds in
respect to, or obligated to guarantee or assume any Liability of any Person for
any amount in excess of $10,000.
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5.7 Absence of Certain Changes or Events. Since December 31, 1995, except
as disclosed in the Zynaxis Financial Statements delivered prior to the date of
this Agreement or as disclosed in Section 5.7 of the Zynaxis Disclosure
Memorandum, (i) there have been no events, changes, or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Zynaxis, and (ii) the Zynaxis Companies have not
taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of Zynaxis provided in Article 7.
5.8 Tax Matters.
(a) All material Tax Returns required to be filed by or on behalf of any of
the Zynaxis Companies have been timely filed or requests for extensions have
been timely filed, granted, and have not expired for periods ended on or before
December 31, 1995, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, and all Tax Returns filed are complete
and accurate. All Taxes shown on filed Tax Returns have been paid. As of the
date of this Agreement, there is no audit examination, deficiency, or refund
Litigation with respect to any Taxes, except as reserved against in the Zynaxis
Financial Statements delivered prior to the date of this Agreement. All Taxes
and other Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid. There are no Liens with respect to Taxes
upon any of the Assets of the Zynaxis Companies, except for any such Liens which
are not reasonably likely to have a Material Adverse Effect on Zynaxis.
(b) None of the Zynaxis Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by the
Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any Taxes due or to become due for any of the Zynaxis
Companies for the period or periods through and including the date of the
respective Zynaxis Financial Statements that has been made and is reflected on
such Zynaxis Financial Statements is sufficient to cover all such Taxes.
(d) Deferred Taxes of the Zynaxis Companies have been provided for in
accordance with GAAP.
(e) None of the Zynaxis Companies is a party to any Tax allocation or
sharing agreement and none of the Zynaxis Companies has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Zynaxis) or has any Liability for Taxes of
any Person (other than Zynaxis and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise.
(f) Each of the Zynaxis Companies is in compliance with, and its records
contain all information and documents (including properly completed IRS Forms
W-9) necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code.
(g) Except as disclosed in Section 5.8 of the Zynaxis Disclosure
Memorandum, none of the Zynaxis Companies has made any payments, is obligated to
make any payments, or is a party to any Contract that could obligate it to make
any payments that would be disallowed as a deduction under Section 280G or
162(m) of the Internal Revenue Code.
(h) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the Zynaxis Companies that occurred during or after any
taxable period in which the Zynaxis Companies incurred a net operating loss that
carries over to any taxable period ending after December 31, 1995.
(i) No Zynaxis Company has or has had in any foreign country a permanent
establishment, as defined in any applicable tax treaty or convention between the
United States and such foreign country.
5.9 Assets.
(a) Except as disclosed in Section 5.9 of the Zynaxis Disclosure Memorandum
or as disclosed or reserved against in the Zynaxis Financial Statements
delivered prior to the date of this Agreement, the
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Zynaxis Companies have good and marketable title, free and clear of all Liens,
to all of their respective Assets, except for any such Liens or other defects of
title which are not reasonably likely to have a Material Adverse Effect on
Zynaxis.
(b) Except as disclosed in Section 5.9(b) of the Zynaxis Disclosure
Memorandum, the accounts receivable of the Zynaxis Companies as set forth on the
most recent balance sheet included in the Zynaxis Financial Statements delivered
prior to the date of this Agreement or arising since the date thereof are valid
and genuine; have arisen solely out of bona fide sales and deliveries of goods,
performance of services and other business transactions in the ordinary course
of business consistent with past practice; are not subject to valid defenses,
set-offs or counterclaims. The allowance for collection losses on such balance
sheet has been determined in accordance with GAAP.
(c) All Assets which are material to Zynaxis's business on a consolidated
basis, held under leases or subleases by any of the Zynaxis Companies, are held
under valid Contracts enforceable in accordance with their respective terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect.
(d) Set forth in Section 5.9(d) of the Zynaxis Disclosure Memorandum is a
description of each insurance policy maintained by any of the Zynaxis Companies,
including the type of policy, the name of the insurer, the coverage limits and
the premiums. None of the Zynaxis Companies has received notice from any
insurance carrier that (i) any policy of insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased. There are
presently no claims for amounts exceeding in any individual case $5,000 pending
under such policies of insurance and no notices of claims in excess of such
amounts have been given by any Zynaxis Company under such policies.
(e) The Assets of the Zynaxis Companies include all Assets required to
operate the business of the Zynaxis Companies as presently conducted. The
Zynaxis Companies have no Inventory.
5.10 Intellectual Property. Except as disclosed in Section 5.10 of the
Zynaxis Disclosure Memorandum, each Zynaxis Company owns or has a license to use
all of the Intellectual Property used by such Zynaxis Company in the course of
its business. Each Zynaxis Company is the owner of or has a license to any
Intellectual Property sold or licensed to a third party by such Zynaxis Company
in connection with such Zynaxis Company's business operations, and such Zynaxis
Company has the right to convey by sale or license any Intellectual Property so
conveyed. Except as disclosed in Section 5.10 of the Zynaxis Disclosure
Memorandum, no Zynaxis Company is in Default under any of its Intellectual
Property licenses. Except as disclosed in Section 5.10 of the Zynaxis Disclosure
Memorandum, no proceedings have been instituted, or are pending or to the
Knowledge of Zynaxis threatened, which challenge the rights of any Zynaxis
Company with respect to Intellectual Property used, sold or licensed by such
Zynaxis Company in the course of its business, nor has any person claimed or
alleged any rights to such Intellectual Property. To the Knowledge of Zynaxis,
the conduct of the business of the Zynaxis Companies does not infringe any
Intellectual Property of any other person. Except as disclosed in Section 5.10
of the Zynaxis Disclosure Memorandum, no Zynaxis Company is obligated to pay any
recurring royalties to any Person with respect to any such Intellectual
Property. Except as disclosed in Section 5.10 of the Zynaxis Disclosure
Memorandum, every officer, director, or employee of any Zynaxis Company is a
party to a Contract which requires such officer, director or employee to assign
any interest in any Intellectual Property to a Zynaxis Company and to keep
confidential any trade secrets, proprietary data, customer information, or other
business information of a Zynaxis Company, and, to the Knowledge of Zynaxis, no
such officer, director or employee is party to any Contract with any Person
other than a Zynaxis Company which requires such officer, director or employee
to assign any interest in any Intellectual Property to any Person other than a
Zynaxis Company or to keep confidential any trade secrets, proprietary data,
customer information, or other business information of any Person other than a
Zynaxis Company. Except as disclosed in Section 5.10 of the Zynaxis Disclosure
Memorandum, to the Knowledge of
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Zynaxis, no officer, director or employee of any Zynaxis Company is party to any
Contract which restricts or prohibits such officer, director or employee from
engaging in activities competitive with any Person, including any Zynaxis
Company.
5.11 Environmental Matters.
(a) Each Zynaxis Company, its Participation Facilities, and its Operating
Properties are, and have been, in compliance with all Environmental Laws.
(b) There is no Litigation pending or, to the Knowledge of Zynaxis,
threatened before any court, governmental agency, or authority or other forum in
which any Zynaxis Company or any of its Operating Properties or Participation
Facilities (or Zynaxis in respect of such Operating Property or Participation
Facility) has been or, with respect to threatened Litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release, discharge, spillage, or
disposal into the environment of any Hazardous Material, whether or not
occurring at, on, under, adjacent to, or affecting (or potentially affecting) a
site owned, leased, or operated by any Zynaxis Company or any of its Operating
Properties or Participation Facilities, nor is there any reasonable basis for
any Litigation of a type described in this sentence.
(c) During the period of (i) any Zynaxis Company's ownership or operation
of any of their respective current properties, (ii) any Zynaxis Company's
participation in the management of any Participation Facility, or (iii) any
Zynaxis Company's holding of a security interest in an Operating Property, there
have been no releases, discharges, spillages, or disposals of Hazardous Material
in, on, under, adjacent to, or affecting (or potentially affecting) such
properties. Prior to the period of (i) any Zynaxis Company's ownership or
operation of any of their respective current properties, (ii) any Zynaxis
Company's participation in the management of any Participation Facility, or
(iii) any Zynaxis Company's holding of a security interest in a Operating
Property, to the Knowledge of Zynaxis, there were no releases, discharges,
spillages, or disposals of Hazardous Material in, on, under, or affecting any
such property, Participation Facility or Operating Property.
5.12 Compliance with Laws. Each Zynaxis Company has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Zynaxis, and there has occurred no Default under any such
Permit other than Defaults which are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Zynaxis. Except as disclosed
in Section 5.12 of the Zynaxis Disclosure Memorandum, none of the Zynaxis
Companies:
(a) is in Default under any of the provisions of its Articles of
Incorporation, as amended, or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for Defaults which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Zynaxis; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any Zynaxis Company is not in compliance with any of the Laws or
Orders which such governmental authority or Regulatory Authority enforces,
where such noncompliance is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Zynaxis, (ii) threatening to
revoke any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Zynaxis, or
(iii) requiring any Zynaxis Company to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or to adopt any Board
resolution or similar undertaking.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to Vaxcel.
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5.13 Labor Relations. No Zynaxis Company is the subject of any Litigation
asserting that it or any other Zynaxis Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state Law) or seeking to compel it or any other Zynaxis Company to bargain with
any labor organization as to wages or conditions of employment, nor is any
Zynaxis Company party to any collective bargaining agreement, nor is there any
strike or other labor dispute involving any Zynaxis Company, pending or
threatened, nor to the Knowledge of Zynaxis, is there any activity involving any
Zynaxis Company's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.14 Employee Benefit Plans.
(a) Zynaxis has disclosed in Section 5.14 of the Zynaxis Disclosure
Memorandum, and has delivered or made available to Vaxcel prior to the execution
of this Agreement, copies in each case of, all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any Zynaxis Company or ERISA
Affiliate (as defined below) thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
and under which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate (collectively,
the "Zynaxis Benefit Plans"). Any of the Zynaxis Benefit Plans which is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, is referred to herein as a "Zynaxis ERISA Plan." Each Zynaxis ERISA Plan
which is also a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code) is referred to herein as a "Zynaxis Pension Plan." No
Zynaxis Pension Plan is or has been a multiemployer plan within the meaning of
Section 3(37) of ERISA.
(b) All Zynaxis Benefit Plans are in compliance with the applicable terms
of ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Zynaxis. Each Zynaxis ERISA Plan which
is intended to be qualified under Section 401(a) of the Internal Revenue Code
has received a favorable determination letter from the Internal Revenue Service,
and Zynaxis is not aware of any circumstances likely to result in revocation of
any such favorable determination letter. To the Knowledge of Zynaxis, no Zynaxis
Company has engaged in a transaction with respect to any Zynaxis Benefit Plan
that, assuming the taxable period of such transaction expired as of the date
hereof, would subject any Zynaxis Company to a Tax imposed by either Section
4975 of the Internal Revenue Code or Section 502(i) of ERISA that, individually
or in the aggregate, is reasonably likely to have a Material Adverse Effect on
Zynaxis.
(c) No Zynaxis Pension Plan has any "unfunded current liability," as that
term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value of
the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA when determined under actuarial
factors that would apply if the Zynaxis Pension Plan were terminated in
accordance with all applicable legal requirements. Since the date of the most
recent actuarial valuation, there has been (i) no material change in the
financial position of any Zynaxis Pension Plan, (ii) no change in the actuarial
assumptions with respect to any Zynaxis Pension Plan, and (iii) no increase in
benefits under any Zynaxis Pension Plan as a result of plan amendments or
changes in applicable Law which is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Zynaxis or materially adversely
affect the funding status of any such plan. Neither any Zynaxis Pension Plan nor
any "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Zynaxis Company, or the single-employer
plan of any entity which is considered one employer with Zynaxis under Section
4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of
ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Internal Revenue Code or
Section 302 of ERISA. No Zynaxis Company has provided, or is required to
provide, security to a Zynaxis Pension Plan or to any single-employer plan of an
ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code.
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(d) No Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by any Zynaxis Company with respect to any ongoing,
frozen, or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate. No Zynaxis Company has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any Zynaxis Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the Zynaxis Disclosure
Memorandum, no Zynaxis Company has any Liability for retiree health and life
benefits under any of the Zynaxis Benefit Plans and there are no restrictions on
the rights of such Zynaxis Company to amend or terminate any such retiree health
or benefit Plan without incurring any Liability thereunder.
(f) Except as disclosed in Section 5.14 of the Zynaxis Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Zynaxis Company
from any Zynaxis Company under any Zynaxis Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Zynaxis Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any Zynaxis Company and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the Zynaxis Financial Statements to the extent
required by and in accordance with GAAP.
5.15 Material Contracts. Except as disclosed in Section 5.15 of the
Zynaxis Disclosure Memorandum or otherwise reflected in the Zynaxis Financial
Statements, none of the Zynaxis Companies, nor any of their respective Assets,
businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, (i) any employment, severance, termination, consulting,
or retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $10,000, (ii) any Contract relating to the borrowing
of money by any Zynaxis Company or the guarantee by any Zynaxis Company of any
such obligation (other than Contracts evidencing trade payables and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any Contract which prohibits or restricts any Zynaxis Company from
engaging in any business activities in any geographic area, line of business or
otherwise in competition with any other Person, (iv) any Contract between or
among Zynaxis Companies, (v) any Contract involving Intellectual Property (other
than Contracts entered into in the ordinary course with customers and "shrink-
wrap" software licenses), (vi) any Contract relating to the provision of data
processing, network communication, or other technical services to or by any
Zynaxis Company, (vii) any Contract relating to the purchase or sale of any
goods or services (other than Contracts entered into in the ordinary course of
business and involving payments under any individual Contract not in excess of
$20,000), and (viii) any other Contract or amendment thereto that would be
required to be filed as an exhibit to a Form 10-K filed by Zynaxis with the SEC
as of the date of this Agreement (together with all Contracts referred to in
Sections 5.9 and 5.14(a), the "Zynaxis Contracts"). With respect to each Zynaxis
Contract and except as disclosed in Section 5.15 of the Zynaxis Disclosure
Memorandum: (i) the Contract is in full force and effect; (ii) no Zynaxis
Company is in Default thereunder; (iii) no Zynaxis Company has repudiated or
waived any material provision of any such Contract; and (iv) no other party to
any such Contract is, to the Knowledge of Zynaxis, in Default in any respect or
has repudiated or waived any material provision thereunder. Except as disclosed
in Section 5.15 of the Zynaxis Disclosure Memorandum, all of the indebtedness of
any Zynaxis Company for money borrowed is prepayable at any time by such Zynaxis
Company without penalty or premium.
5.16 Legal Proceedings. Except as disclosed in Section 5.16 of the Zynaxis
Disclosure Memorandum, there is no Litigation instituted or pending, or, to the
Knowledge of Zynaxis, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an
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unfavorable outcome) against any Zynaxis Company, or against any director,
employee or employee benefit plan of any Zynaxis Company, or against any Asset,
interest, or right of any of them, that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Zynaxis, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any Zynaxis Company that is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Zynaxis.
Section 5.16 of the Zynaxis Disclosure Memorandum contains a summary of all
Litigation as of the date of this Agreement to which any Zynaxis Company is a
party and which names a Zynaxis Company as a defendant or cross-defendant or for
which any Zynaxis Company has any potential Liability.
5.17 Reports. Since January 1, 1993, or the date of organization, if
later, each Zynaxis Company has timely filed all reports and statements,
together with any amendments required to be made with respect thereto, that it
was required to file with Regulatory Authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Zynaxis).
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
5.18 Statements True and Correct. No statement, certificate, instrument,
or other writing furnished or to be furnished by any Zynaxis Company or any
officer, director, employee or Subsidiary thereof to any Vaxcel Company pursuant
to this Agreement or any other document, agreement, or instrument referred to
herein contains or will contain any untrue statement of material fact or will
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by any Zynaxis Company or any officer,
director, employee or Subsidiary thereof for inclusion in the Registration
Statement to be filed by Vaxcel with the SEC will, when the Registration
Statement becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to be supplied by
any Zynaxis Company or any officer, director, employee or Subsidiary thereof for
inclusion in the Proxy Statement to be mailed to Zynaxis's shareholders in
connection with the Shareholders' Meeting, and any other documents to be filed
by a Zynaxis Company or any officer, director, employee or Subsidiary thereof
with the SEC or any other Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first mailed to the
shareholders of Zynaxis, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or, in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Shareholders' Meeting. All documents that
any Zynaxis Company or any officer, director, employee or Subsidiary thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable Law.
5.19 Regulatory Matters. No Zynaxis Company or any officer, director,
employee or Subsidiary thereof has taken or agreed to take any action or has any
Knowledge of any fact or circumstance that is reasonably likely to materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 7.1(b) or result in the imposition of a condition or restriction of the
type referred to in the last sentence of such Section.
5.20 Charter Provisions. Each Zynaxis Company has taken all action so that
the entering into of this Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement do not and will not result in
the grant of any rights to any Person under the Articles of Incorporation, as
amended, Bylaws or other governing instruments of any Zynaxis Company, except
such rights as exist on the date hereof, or restrict or impair the ability of
Vaxcel or any of its Subsidiaries to vote, or otherwise to exercise the rights
of a shareholder with respect to, shares of any Zynaxis Company that may be
directly or indirectly acquired or controlled by them.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF
CYTRX, VAXCEL AND VAXCEL MERGER SUB
CytRx, Vaxcel and Vaxcel Merger Sub hereby represent and warrant to Zynaxis
as follows:
6.1 Organization, Standing, and Power.
(a) CytRx is a corporation duly organized, validly existing, and in good
standing under the Laws of the State of Delaware, and has the corporate power
and authority to carry on its business as now conducted and to own, lease and
operate its Assets. CytRx is duly qualified or licensed to transact business as
a foreign corporation in good standing in the states of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on CytRx.
(b) Vaxcel is a corporation duly organized, validly existing, and in good
standing under the Laws of the State of Delaware, and has the corporate power
and authority to carry on its business as now conducted and to own, lease and
operate its Assets. Vaxcel is duly qualified or licensed to transact business as
a foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Vaxcel. The minute book and other organizational documents for Vaxcel
have been made available to Zynaxis for its review and, except as disclosed in
Section 6.1 of the Vaxcel Disclosure Memorandum, are true and complete in all
material respects as of the date of this Agreement and accurately reflect in all
material respects all amendments thereto and all proceedings of the Board of
Directors and shareholders thereof.
(c) Vaxcel Merger Sub is a corporation duly organized, validly existing,
and in good standing under the Laws of the State of Georgia, and has the
corporate power and authority to carry on its business as now conducted and to
own, lease and operate its Assets. The minute book and other organizational
documents for Vaxcel Merger Sub have been made available to Zynaxis for its
review and are true and complete in all material respects as of the date of this
Agreement and accurately reflect in all material respects all amendments thereto
and all proceedings of the Board of Directors and shareholders thereof.
6.2 Authority; No Breach By Agreement.
(a) Each of CytRx, Vaxcel and Vaxcel Merger Sub has the corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of such corporations. Vaxcel, as the sole shareholder of Vaxcel Merger Sub,
has voted all outstanding shares of Vaxcel Merger Sub Common Stock in favor of
adoption of this Agreement, as and to the extent required by applicable Law.
This Agreement represents a legal, valid, and binding obligation of each of
CytRx, Vaxcel and Vaxcel Merger Sub, enforceable against each of CytRx, Vaxcel
and Vaxcel Merger Sub in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by CytRx, Vaxcel
and Vaxcel Merger Sub, nor the consummation by CytRx, Vaxcel and Vaxcel Merger
Sub of the transactions contemplated hereby, nor compliance by CytRx, Vaxcel and
Vaxcel Merger Sub with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of the Certificate of Incorporation or
Bylaws of any of CytRx, Vaxcel or Vaxcel Merger Sub, or any resolution adopted
by the Board of Directors or the Shareholders of any Vaxcel Company, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any Vaxcel Company under, any
Contract or Permit of any Vaxcel Company, or, (iii) subject to receipt of the
requisite Consents referred to in Section 9.1(b), constitute or result in a
Default under, or require any Consent pursuant to, any Law or Order applicable
to any Vaxcel
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Company or any of their respective material Assets (including any Vaxcel Company
or any Zynaxis Company becoming subject to or liable for the payment of any Tax
or any of the Assets owned by any Vaxcel Company or any Zynaxis Company being
reassessed or revalued by any Taxing authority).
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
no notice to, filing with, or Consent of, any public body or authority is
necessary for the execution, delivery and performance by CytRx, Vaxcel and
Vaxcel Merger Sub of their obligations under this Agreement.
6.3 Capital Stock.
(a) The authorized capital stock of Vaxcel consists of (i) 30,000,000
shares of Vaxcel Common Stock, of which 8,250,004 are issued and outstanding,
and (ii) 2,000,000 shares of Vaxcel Preferred Stock, none of which are issued
and outstanding. All of the issued and outstanding shares of Vaxcel Capital
Stock are, and all of the shares of Vaxcel Common Stock to be issued in exchange
for shares of Zynaxis Common Stock upon consummation of the Merger, when issued
in accordance with the terms of this Agreement, will be, duly and validly issued
and outstanding and fully paid and nonassessable under the DGCL. None of the
outstanding shares of Vaxcel Capital Stock has been, and none of the shares of
Vaxcel Common Stock to be issued in exchange for shares of Zynaxis Common Stock
upon consummation of the Merger will be, issued in violation of any preemptive
rights of the current or past stockholders of Vaxcel.
(b) The authorized capital stock of Vaxcel Merger Sub consists of (i) 1,000
shares of Common Stock, of which 500 shares are issued and outstanding as of the
date of this Agreement. All of the issued and outstanding shares of Vaxcel
Merger Sub Common Stock are duly and validly issued and fully paid and
nonassessable under the GBCC. None of the outstanding shares of Vaxcel Merger
Sub Common Stock has been issued in violation of any preemptive rights of the
current or past shareholders of Vaxcel Merger Sub.
(c) Except as set forth in Sections 6.3(a) and 6.3(b), or as disclosed in
Section 6.3 of the Vaxcel Disclosure Memorandum, there are no shares of capital
stock or other equity securities of Vaxcel or Vaxcel Merger Sub outstanding and
no outstanding Equity Rights relating to Vaxcel or Vaxcel Merger Sub Capital
Stock.
Vaxcel and Vaxcel Merger Sub hereby represent and warrant to Zynaxis as
follows:
6.4 Vaxcel Subsidiaries. Vaxcel has disclosed in Section 6.4 of the Vaxcel
Disclosure Memorandum all of the Vaxcel Subsidiaries as of the date of this
Agreement that are corporations (identifying its jurisdiction of incorporation,
each jurisdiction in which the character of its Assets or the nature or conduct
of its business requires it to be qualified and/or licensed to transact
business, and the number of shares owned and percentage ownership interest
represented by such share ownership) and all of the Vaxcel Subsidiaries that are
general or limited partnerships or other non-corporate entities (identifying the
Law under which such entity is organized, each jurisdiction in which the
character of its Assets or the nature or conduct of its business requires it to
be qualified and/or licensed to transact business, and the amount and nature of
the ownership interest therein). Except as disclosed in Section 6.4 of the
Vaxcel Disclosure Memorandum, Vaxcel or one of its Subsidiaries owns all of the
issued and outstanding shares of capital stock (or other equity interests) of
each Vaxcel Subsidiary. No capital stock (or other equity interest) of any
Vaxcel Subsidiary is or may become required to be issued (other than to another
Vaxcel Company) by reason of any Equity Rights, and there are no Contracts by
which any Vaxcel Subsidiary is bound to issue (other than to another Vaxcel
Company) additional shares of its capital stock (or other equity interests) or
Equity Rights or by which any Vaxcel Company is or may be bound to transfer any
shares of the capital stock (or other equity interests) of any Vaxcel Subsidiary
(other than to another Vaxcel Company). There are no Contracts relating to the
rights of any Vaxcel Company to vote or to dispose of any shares of the capital
stock (or other equity interests) of any Vaxcel Subsidiary. All of the shares of
capital stock (or other equity interests) of each Vaxcel Subsidiary held by a
Vaxcel Company are fully paid and nonassessable under the applicable corporation
Law of the jurisdiction in which such Subsidiary is incorporated or organized
and are owned by the Vaxcel Company free and clear of any Lien. Each Vaxcel
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Subsidiary is duly organized, validly existing, and (as to corporations) in good
standing under the Laws of the jurisdiction in which it is incorporated or
organized, and has the power and authority necessary for it to own, lease and
operate its Assets and to carry on its business as now conducted. Each Vaxcel
Subsidiary is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Vaxcel. The minute book and other organizational documents for each
Vaxcel Subsidiary have been made available to Zynaxis for its review, and are
true and complete in all material respects as in effect as of the date of this
Agreement and accurately reflect in all material respects all amendments thereto
and all proceedings of the Board of Directors and shareholders thereof.
6.5 Vaxcel Financial Statements. The books and records of Vaxcel are
accurate and complete. The Vaxcel Financial Statements have been prepared from
such books and records and reflect, in all material respects and in reasonable
detail, the transactions and assets and liabilities of Vaxcel.
6.6 Absence of Undisclosed Liabilities. No Vaxcel Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Vaxcel, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Vaxcel as of
December 31, 1995 and September 30, 1996, included in the Vaxcel Financial
Statements delivered prior to the date of this Agreement or reflected in the
notes thereto. No Vaxcel Company has incurred or paid any Liability since
September 30, 1996, except for such Liabilities incurred or paid (i) in the
ordinary course of business consistent with past business practice and which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Vaxcel or (ii) in connection with the transactions
contemplated by this Agreement. Except as disclosed in the Vaxcel Financial
Statements, no Vaxcel Company is directly or indirectly liable, by guarantee,
indemnity, or otherwise, upon or with respect to, or obligated, by discount or
repurchase agreement or in any other way, to provide funds in respect to, or
obligated to guarantee or assume any Liability of any Person for any amount in
excess of $10,000.
6.7 Absence of Certain Changes or Events. Since December 31, 1995, except
as disclosed in the Vaxcel Financial Statements delivered prior to the date of
this Agreement, (i) there have been no events, changes or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Vaxcel, and (ii) the Vaxcel Companies have not taken
any action, or failed to take any action, prior to the date of this Agreement,
which action or failure, if taken after the date of this Agreement, would
represent or result in a material breach or violation of any of the covenants
and agreements of Vaxcel provided in Article 7.
6.8 Tax Matters.
(a) All material Tax Returns required to be filed by or on behalf of any of
the Vaxcel Companies have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1995, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time and all Tax Returns filed are complete
and accurate. All material Taxes shown on filed Tax Returns have been paid. As
of the date of this Agreement, there is no audit examination, deficiency, or
refund Litigation with respect to any Taxes except as reserved against in the
Vaxcel Financial Statements delivered prior to the date of this Agreement. All
Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid. There are no Liens with
respect to Taxes upon any of the Assets of the Vaxcel Companies, except for such
Liens which are not reasonably likely to have a Material Adverse Effect on
Vaxcel.
(b) None of the Vaxcel Companies has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due (excluding
such statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
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(c) The provision for any Taxes due or to become due for any of the Vaxcel
Companies for the period or periods through and including the date of the
respective Vaxcel Financial Statements that has been made and is reflected on
such Vaxcel Financial Statements is sufficient to cover all such Taxes.
(d) Deferred Taxes of the Vaxcel Companies have been provided for in
accordance with GAAP.
(e) None of the Vaxcel Companies is a party to any Tax allocation or
sharing agreement and none of the Vaxcel Companies has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Vaxcel) has any Liability for Taxes of any
Person (other than Vaxcel and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise.
(f) Each of the Vaxcel Companies is in compliance with, and its records
contain all information and documents (including properly completed IRS Forms
W-9) necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code.
6.9 Assets.
(a) Except as reserved against in the Vaxcel Financial Statements delivered
prior to the date of this Agreement, the Vaxcel Companies have good and
marketable title, free and clear of all Liens, to all of their respective
Assets, except for any such Liens or other defects of title which are not
reasonably likely to have a Material Adverse Effect on Vaxcel. All tangible
properties used in the businesses of the Vaxcel Companies are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with Vaxcel's past practices of the Vaxcel Companies.
(b) The Vaxcel Companies have no Inventory.
(c) The accounts receivable of the Vaxcel Companies as set forth on the
most recent balance sheet included in the Vaxcel Financial Statements delivered
prior to the date of this Agreement or arising since the date thereof are valid
and genuine; have arisen solely out of bona fide sales and deliveries of goods,
performance of services and other business transactions in the ordinary course
of business consistent with past practice; are not subject to valid defenses,
set-offs or counterclaims; and are collectible within 90 days after billing at
the full recorded amount thereof less, in the case of accounts receivable
appearing on the most recent balance sheet included in the Vaxcel Financial
Statements delivered prior to the date of this Agreement, the recorded allowance
for collection losses on such balance sheet. The allowance for collection losses
on such balance sheet has been determined in accordance with GAAP.
(d) All Assets which are material to Vaxcel's business on a consolidated
basis, held under leases or subleases by any of the Vaxcel Companies, are held
under valid Contracts enforceable in accordance with their respective terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other Laws affecting the enforcement of creditors'
rights generally and except that the availability of the equitable remedy of
specific performance or injunctive relief is subject to the discretion of the
court before which any proceedings may be brought), and each such Contract is in
full force and effect.
(e) The Vaxcel Companies currently maintain insurance similar in amounts,
scope and coverage to that maintained by other peer companies. None of the
Vaxcel Companies has received notice from any insurance carrier that (i) such
insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. There are presently no claims for amounts
exceeding in any individual case $5,000 pending under such policies of insurance
and no notices of claims in excess of such amount have been given by any Vaxcel
Company under such policies.
(f) The Assets of the Vaxcel Companies include all Assets required to
operate the business of the Vaxcel Companies as presently conducted.
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6.10 Intellectual Property. Each Vaxcel Company owns or has a license to
use all of the Intellectual Property used by such Vaxcel Company in the course
of its business. Each Vaxcel Company is the owner of or has a license to any
Intellectual Property sold or licensed to a third party by such Vaxcel Company
in connection with such Vaxcel Company's business operations, and such Vaxcel
Company has the right to convey by sale or license any Intellectual Property so
conveyed. No Vaxcel Company is in Default under any of its Intellectual Property
licenses. No proceedings have been instituted, or are pending or, to the
Knowledge of Vaxcel, threatened, which challenge the rights of any Vaxcel
Company with respect to Intellectual Property used, sold or licensed by such
Vaxcel Company in the course of its business, nor has any person claimed or
alleged any rights to such Intellectual Property. To the knowledge of Vaxcel and
Vaxcel Merger Sub, the conduct of the business of the Vaxcel Companies does not
infringe any Intellectual Property of any other person. Except as disclosed in
Section 6.10 of the Vaxcel Disclosure Memorandum, no Vaxcel Company is obligated
to pay any recurring royalties to any Person with respect to any such
Intellectual Property. Every officer, director, or employee of any Vaxcel
Company is a party to a Contract which requires such officer, director or
employee to assign any interest in any Intellectual Property to a Vaxcel Company
and to keep confidential any trade secrets, proprietary data, customer
information, or other business information of a Vaxcel Company, and to the
Knowledge of Vaxcel and Vaxcel Merger Sub, no such officer, director or employee
is party to any Contract with any Person other than a Vaxcel Company which
requires such officer, director or employee to assign any interest in any
Intellectual Property to any Person other than a Vaxcel Company or to keep
confidential any trade secrets, proprietary data, customer information, or other
business information of any Person other than a Vaxcel Company. To the Knowledge
of Vaxcel and Vaxcel Merger Sub, no officer, director or employee of any Vaxcel
Company is party to any Contract which restricts or prohibits such officer,
director or employee from engaging in activities competitive with any Person,
including any Vaxcel Company.
6.11 Environmental Matters.
(a) Each Vaxcel Company, its Participation Facilities, and its Operating
Properties are, and have been, in compliance with all Environmental Laws.
(b) There is no Litigation pending or, to the Knowledge of Vaxcel and
Vaxcel Merger Sub, threatened before any court, governmental agency, or
authority or other forum in which any Vaxcel Company or any of its Operating
Properties or Participation Facilities (or Vaxcel in respect of such Operating
Property or Participation Facility) has been or, with respect to threatened
Litigation, may be named as a defendant (i) for alleged noncompliance (including
by any predecessor) with any Environmental Law or (ii) relating to the release,
discharge, spillage, or disposal into the environment of any Hazardous Material,
whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site owned, leased, or operated by any Vaxcel Company
or any of its Operating Properties or Participation Facilities nor is there any
reasonable basis for any Litigation of a type described in this sentence.
(c) During the period of (i) any Vaxcel Company's ownership or operation of
any of their respective current properties, (ii) any Vaxcel Company's
participation in the management of any Participation Facility, or (iii) any
Vaxcel Company's holding of a security interest in a Operating Property, there
have been no releases, discharges, spillages, or disposals of Hazardous Material
in, on, under, adjacent to, or affecting (or potentially affecting) such
properties. Prior to the period of (i) any Vaxcel Company's ownership or
operation of any of their respective current properties, (ii) any Vaxcel
Company's participation in the management of any Participation Facility, or
(iii) any Vaxcel Company's holding of a security interest in a Operating
Property, to the Knowledge of Vaxcel, there were no releases, discharges,
spillages, or disposals of Hazardous Material in, on, under, or affecting any
such property, Participation Facility or Operating Property.
6.12 Compliance with Laws. Each Vaxcel Company has in effect all Permits
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Vaxcel, and there has occurred no Default under any such
Permit, other than Defaults which are not
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reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Vaxcel. None of the Vaxcel Companies:
(a) is in Default under its Certificate of Incorporation or Bylaws (or
other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for Defaults which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Vaxcel; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any Vaxcel Company is not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, where
such noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Vaxcel, (ii) threatening to revoke
any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Vaxcel, or
(iii) requiring any Vaxcel Company to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking.
6.13 Labor Relations. No Vaxcel Company is the subject of any Litigation
asserting that it or any other Vaxcel Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state Law) or seeking to compel it or any other Vaxcel Company to bargain with
any labor organization as to wages or conditions of employment, nor is any
Vaxcel Company party to any collective bargaining agreement, nor is there any
strike or other labor dispute involving any Vaxcel Company, pending or
threatened, nor to the Knowledge of Vaxcel, is there any activity involving any
Vaxcel Company's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
6.14 Employee Benefit Plans.
(a) Vaxcel has delivered or made available to Zynaxis prior to the
execution of this Agreement copies in each case of all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any Vaxcel Company or ERISA
Affiliate thereof for the benefit of employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries and under which
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries are eligible to participate (collectively, the "Vaxcel
Benefit Plans"). Any of the Vaxcel Benefit Plans which is an "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA, is referred to
herein as a "Vaxcel ERISA Plan." Each Vaxcel ERISA Plan which is also a "defined
benefit plan" (as defined in Section 414(j) of the Internal Revenue Code) is
referred to herein as a "Vaxcel Pension Plan." No Vaxcel Pension Plan is or has
been a multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) All Vaxcel Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Vaxcel. Each Vaxcel ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue Service, and
Vaxcel is not aware of any circumstances likely to result in revocation of any
such favorable determination letter. To the Knowledge of Vaxcel, no Vaxcel
Company has engaged in a transaction with respect to any Vaxcel Benefit Plan
that, assuming the taxable period of such transaction expired as of the date
hereof, would subject any Vaxcel Company to a Tax imposed by either Section 4975
of the Internal Revenue Code or Section 502(i) of ERISA that, individually or in
the aggregate, is reasonably likely to have a Material Adverse Effect on Vaxcel.
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(c) No Vaxcel Pension Plan has any "unfunded current liability," as that
term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value of
the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA when determined under actuarial
factors that would apply if the Vaxcel Pension Plan were terminated in
accordance with all applicable legal requirements. Since the date of the most
recent actuarial valuation, there has been (i) no material change in the
financial position of a Vaxcel Pension Plan, (ii) no change in the actuarial
assumptions with respect to any Vaxcel Pension Plan, and (iii) no increase in
benefits under any Vaxcel Pension Plan as a result of plan amendments or changes
in applicable Law which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Vaxcel or materially adversely affect
the funding status of any such plan. Neither any Vaxcel Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Vaxcel Company, or the single-employer
plan of any ERISA Affiliate has an "accumulated funding deficiency" within the
meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA. No
Vaxcel Company has provided, or is required to provide, security to a Vaxcel
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by any Vaxcel Company with respect to any ongoing,
frozen or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate. No Vaxcel Company has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any Vaxcel Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) No Vaxcel Company has any Liability for retiree health and life
benefits under any of the Vaxcel Benefit Plans and there are no restrictions on
the rights of such Vaxcel Company to amend or terminate any such retiree health
or benefit Plan without incurring any Liability thereunder.
(f) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Vaxcel Company
from any Vaxcel Company under any Vaxcel Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Vaxcel Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any Vaxcel Company and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the Vaxcel Financial Statements to the extent
required by and in accordance with GAAP.
6.15 Material Contracts. Except as disclosed in Section 6.15 of the Vaxcel
Disclosure Memorandum or otherwise reflected in the Vaxcel Financial Statements,
none of the Vaxcel Companies, nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $10,000, (ii) any Contract relating to the borrowing of money by any
Vaxcel Company or the guarantee by any Vaxcel Company of any such obligation
(other than Contracts evidencing trade payables and Contracts relating to
borrowings or guarantees made in the ordinary course of business), (iii) any
Contract which prohibits or restricts any Vaxcel Company from engaging in any
business activities in any geographic area, line of business or otherwise in
competition with any other Person, (iv) any Contract between or among Vaxcel
Companies, (v) any Contract involving Intellectual Property (other than
Contracts entered into in the ordinary course with customers and "shrink-wrap"
software licenses), (vi) any Contract relating to the provision of data
processing, network communication, or other technical services to or by any
Vaxcel Company, and (vii) any Contract relating to the purchase
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or sale of any goods or services (other than Contracts entered into in the
ordinary course of business and involving payments under any individual Contract
not in excess of $20,000) (together with all Contracts referred to in Sections
6.9 and 6.14(a), the "Vaxcel Contracts"). With respect to each Vaxcel Contract:
(i) the Contract is in full force and effect; (ii) no Vaxcel Company is in
Default thereunder; (iii) no Vaxcel Company has repudiated or waived any
material provision of any such Contract; and (iv) no other party to any such
Contract is, to the Knowledge of Vaxcel, in Default in any respect or has
repudiated or waived any material provision thereunder. All of the indebtedness
of any Vaxcel Company for money borrowed is prepayable at any time by such
Vaxcel Company without penalty or premium.
6.16 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of Vaxcel, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any Vaxcel Company, or against any director,
employee or employee benefit plan of any Vaxcel Company, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Vaxcel, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any Vaxcel Company, that are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Vaxcel.
6.17 Reports. Since January 1, 1993, or the date of organization if later,
each Vaxcel Company has timely filed all reports and statements, together with
any amendments required to be made with respect thereto, that it was required to
file with Regulatory Authorities (except, in the case of state securities
authorities, failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Vaxcel). As of
their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
6.18 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any Vaxcel Company or any officer,
director, employee or Subsidiary thereof to Zynaxis pursuant to this Agreement
or any other document, agreement or instrument referred to herein contains or
will contain any untrue statement of material fact or will omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by any Vaxcel Company or any officer,
director, employee or Subsidiary thereof for inclusion in the Registration
Statement to be filed by Vaxcel with the SEC, will, when the Registration
Statement becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to be supplied by
any Vaxcel Company or any officer, director, employee or Subsidiary thereof for
inclusion in the Proxy Statement to be mailed to Zynaxis's shareholders in
connection with the Shareholders' Meeting, and any other documents to be filed
by any Vaxcel Company or any officer, director, employee or Subsidiary thereof
with any Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and with respect
to the Proxy Statement, when first mailed to the shareholders of Zynaxis, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto, at the time of
the Shareholders' Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for the
Shareholders' Meeting. All documents that any Vaxcel Company or any officer,
director, employee or Subsidiary thereof is responsible for filing with any
Regulatory Authority in connection with the transactions contemplated hereby
will comply as to form in all material respects with the provisions of
applicable Law.
6.19 Regulatory Matters. Neither CytRx nor any Vaxcel Company or any
officer, director, employee or Subsidiary thereof has taken or agreed to take
any action or has any Knowledge of any fact or circumstance that is reasonably
likely to materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
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ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Zynaxis. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
unless the prior written consent of Vaxcel shall have been obtained, and except
as otherwise expressly contemplated by the Transaction Documents or disclosed in
the Zynaxis Disclosure Memorandum, Zynaxis shall and shall cause each of its
Subsidiaries to (a) operate its business only in the usual, regular, and
ordinary course, (b) preserve intact its business organization and Assets and
maintain its rights and franchises, and (c) take no action which would (i)
materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentences of
Section 9.1(b) or 9.1(c), or (ii) materially adversely affect the ability of any
Party to perform its covenants and agreements under this Agreement.
7.2 Negative Covenants of Zynaxis. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement, unless
the prior written consent of Vaxcel shall have been obtained, and except as
otherwise expressly contemplated by the Transaction Documents or disclosed in
the Zynaxis Disclosure Memorandum, Zynaxis covenants and agrees that it will not
do or agree or commit to do, or permit any of its Subsidiaries to do or agree or
commit to do, any of the following:
(a) amend the Articles of Incorporation, as amended, Bylaws, or other
governing instruments of any Zynaxis Company; or
(b) incur any additional debt obligation or other obligation for
borrowed money except in the ordinary course of the business of the Zynaxis
Companies consistent with past practices, or impose, or suffer the
imposition, on any Asset of any Zynaxis Company of any Lien or permit any
such Lien to exist; or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any Zynaxis Company, or declare or pay any dividend or
make any other distribution in respect of Zynaxis's capital stock; or
(d) except as pursuant to the conversion of Zynaxis Preferred Stock or
the exercise of stock options or warrants listed in Section 5.3 of the
Zynaxis Disclosure Memorandum, issue, sell, pledge, encumber, authorize the
issuance of, enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of, or otherwise permit to become outstanding, any
additional shares of capital stock of any Zynaxis Company, or any stock
appreciation rights, or any option, warrant, or other Equity Right; or
(e) adjust, split, combine or reclassify any capital stock of any
Zynaxis Company or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of Zynaxis Capital Stock, or
sell, lease, mortgage or otherwise dispose of or otherwise encumber any
shares of capital stock of any Zynaxis Subsidiary (unless any such shares
of stock are sold or otherwise transferred to another Zynaxis Company); or
(f) sell, lease, mortgage or otherwise dispose of or otherwise
encumber any Asset other than in the ordinary course of business for
reasonable and adequate consideration; or
(g) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less, purchase any securities or make any material investment,
either by purchase of stock or securities, contributions to capital, Asset
transfers, or purchase of any Assets, in any Person other than a wholly
owned Zynaxis Subsidiary, or otherwise acquire direct or indirect control
over any Person, other than in connection with foreclosures in the ordinary
course of business; or
(h) grant any increase in compensation or benefits to the employees or
officers of any Zynaxis Company, except in accordance with past practice
disclosed in Section 7.2(h) of the Zynaxis Disclosure
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Memorandum or as required by Law; pay any severance or termination pay or
any bonus other than pursuant to written policies or Contracts in effect on
the date of this Agreement and disclosed in Section 7.2(h) of the Zynaxis
Disclosure Memorandum or as required by Law; and enter into or amend any
severance agreements with officers of any Zynaxis Company; grant any
material increase in fees or other increases in compensation or other
benefits to directors of any Zynaxis Company except in accordance with past
practice disclosed in Section 7.2(h) of the Zynaxis Disclosure Memorandum;
or
(i) enter into or amend any employment Contract between any Zynaxis
Company and any Person (unless such amendment is required by Law) that the
Zynaxis Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time
on or after the Closing; or
(j) adopt any new employee benefit plan of any Zynaxis Company or
terminate or withdraw from, or make any material change in or to, any
existing employee benefit plans of any Zynaxis Company other than any such
change that is required by Law or that, in the opinion of counsel, is
necessary or advisable to maintain the tax qualified status of any such
plan, or make any distributions from such employee benefit plans, except as
required by Law, the terms of such plans or consistent with past practice;
or
(k) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(l) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any Zynaxis
Company for material money damages or restrictions upon the operations of
any Zynaxis Company; or
(m) enter into, modify, amend or terminate any material Contract
(including any loan Contract with an unpaid balance exceeding $10,000) or
waive, release, compromise or assign any material rights or claims.
7.3 Covenants of Vaxcel. From the date of this Agreement until the earlier
of the Effective Time or the termination of this Agreement, unless the prior
written consent of Zynaxis shall have been obtained, and except as otherwise
expressly contemplated herein, Vaxcel covenants and agrees that it shall (a)
continue to conduct its business and the business of its Subsidiaries in a
manner designed, in its reasonable judgment, to enhance the long-term value of
the Vaxcel Common Stock and the business prospects of the Vaxcel Companies and
to the extent consistent therewith use all reasonable efforts to preserve intact
the Vaxcel Companies' core businesses and goodwill with their respective
employees and the communities they serve, and (b) take no action which would (i)
materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentences of
Section 9.1(b) or 9.1(c), or (ii) materially adversely affect the ability of any
Party to perform its covenants and agreements under this Agreement; provided,
that the foregoing shall not prevent any Vaxcel Company from acquiring any
Assets or other businesses or from discontinuing or disposing of any of its
Assets or business if such action is, in the reasonable judgment of Vaxcel,
desirable in the conduct of the business of Vaxcel and its Subsidiaries,
provided that such actions shall not materially delay the Effective Time or
materially hinder consummation of the Merger. Vaxcel further covenants and
agrees that it will not, without the prior written consent of Zynaxis, which
consent shall not be unreasonably withheld, amend the Certificate of
Incorporation or Bylaws of Vaxcel or, except as expressly contemplated by this
Agreement or the Transaction Documents, in any manner adverse to the holders of
Zynaxis Capital Stock as compared to rights of holders of Vaxcel Common Stock
generally as of the date of this Agreement.
7.4 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
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7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not material). As of their
respective dates, such reports filed with the SEC will comply in all material
respects with the Securities Laws and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Any financial statements contained
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Shareholder Approval.
(a) As soon as practicable after the date hereof Vaxcel shall prepare and
file the Registration Statement with the SEC to register the issuance of the
Merger Shares and to register for resale by the holders thereof the Affiliate
Shares, the Lock-Up Shares and the Warrant Shares (collectively, the "Resale
Shares"), and shall use its reasonable efforts to cause the Registration
Statement to become effective under the 1933 Act and take any action required to
be taken under the applicable state Blue Sky or securities Laws in connection
with the issuance of the Merger Shares and the resale of the Resale Shares upon
consummation of the transactions contemplated by the Transaction Documents.
Zynaxis shall cooperate in the preparation and filing of the Registration
Statement and shall furnish all information concerning it and the holders of
Zynaxis Capital Stock and Equity Rights of Zynaxis as Vaxcel may reasonably
request in connection with such action. Zynaxis shall call a Shareholders'
Meeting, to be held as soon as reasonably practicable after the Registration
Statement is declared effective by the SEC, for the purpose of voting upon
adoption of this Agreement and such other related matters as it deems
appropriate. In connection with the Shareholders' Meeting, (i) Zynaxis and
Vaxcel shall prepare and file with the SEC a Proxy Statement and mail such Proxy
Statement to the shareholders of Zynaxis, (ii) the Parties shall furnish to each
other all information concerning them that they may reasonably request in
connection with such Proxy Statement, (iii) the Board of Directors of Zynaxis
shall recommend to its shareholders the approval of the matters submitted for
approval (subject to the Board of Directors of Zynaxis, after having consulted
with and considered the advice of outside counsel, reasonably determining in
good faith that the making of such recommendation, or the failure to withdraw or
modify its recommendation, would constitute a breach of fiduciary duties of the
members of such Board of Directors to Zynaxis's shareholders under applicable
Law), and (iv) the Board of Directors and officers of Zynaxis shall use their
reasonable efforts to obtain such shareholders' approval (subject to the Board
of Directors of Zynaxis after having consulted with and considered the advice of
outside counsel, reasonably determining in good faith that the taking of such
actions would constitute a breach of fiduciary duties of the members of such
Board of Directors to Zynaxis's shareholders under applicable Law). Vaxcel and
Zynaxis shall make all necessary filings with respect to the Merger under the
Securities Laws.
(b) Vaxcel shall use its best efforts to maintain the effectiveness of the
Registration Statement until the earlier of (i) the date on which the Resale
Shares may be sold without restriction under the 1933 Act or (ii) the fifth
anniversary of the Closing Date subject to such periods of time when Vaxcel must
suspend the use of the prospectus forming a part of the Registration Statement
until such time as an amendment is filed and declared effective or an
appropriate report is filed by Vaxcel with the SEC.
8.2 Applications. The Parties shall promptly prepare and file, and each of
the Parties shall cooperate with each of the other Parties in the preparation
and, where appropriate, filing of, applications with all Regulatory Authorities
having jurisdiction over the transactions contemplated by this Agreement seeking
the requisite Consents necessary to consummate the transactions contemplated by
this Agreement. The Parties
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shall deliver to each other copies of all filings, correspondence and orders to
and from all Regulatory Authorities in connection with the transactions
contemplated hereby.
8.3 Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, Zynaxis and Vaxcel Merger Sub shall execute and
file the Articles of Merger in the Department of State of the Commonwealth of
Pennsylvania and the Certificate of Merger with the Secretary of State of the
State of Georgia in connection with the Merger.
8.4 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use, and
shall cause each of its Subsidiaries to use, its reasonable efforts to obtain
all Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
8.5 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party shall keep the other Parties
advised of all material developments relevant to its business and the
consummation of the Merger and shall permit the other Parties to make or cause
to be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Party.
(b) In addition to the Parties' respective obligations under the
Confidentiality Agreement, which is hereby reaffirmed and adopted, and
incorporated by reference herein each Party shall, and shall cause its advisers
and agents to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
Party which it has discovered through the course of its investigation and which
represents, or is reasonably likely to represent, either a material breach of
any representation, warranty, covenant or agreement of the other Party or which
has had or is reasonably likely to have a Material Adverse Effect on the other
Party.
8.6 Press Releases. Prior to the Effective Time, each of the Parties shall
consult with the other Parties as to the form and substance of any press release
or other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.6
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.7 Certain Actions. Except with respect to the Transaction Documents, no
Zynaxis Company nor any officer, director, employee or Subsidiary thereof nor
any Representatives thereof retained by any Zynaxis Company shall directly or
indirectly solicit any Acquisition Proposal by any Person. Except to the extent
the Board of Directors of Zynaxis, after having consulted with and considered
the advice of outside counsel, reasonably determines in good faith that the
failure to take such actions would constitute a breach of fiduciary duties of
the members of such Board of Directors to Zynaxis's shareholders under
applicable Law, no Zynaxis Company or any officer, director, employee or
Subsidiary or Representative thereof shall furnish any non-
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public information that it is not legally obligated to furnish, negotiate with
respect to, or enter into any Contract with respect to, any Acquisition
Proposal, but Zynaxis may communicate information about such an Acquisition
Proposal to its shareholders if and to the extent that it is required to do so
in order to comply with its legal obligations as advised by outside counsel.
Zynaxis shall promptly advise Vaxcel following the receipt of any Acquisition
Proposal and the details thereof, and advise Vaxcel of any developments with
respect to such Acquisition Proposal promptly upon the occurrence thereof.
Zynaxis shall (i) immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Persons conducted heretofore
with respect to any of the foregoing, and (ii) direct and use its reasonable
efforts to cause all of its officer, director, employee or Subsidiaries and
Representatives not to engage in any of the foregoing.
8.8 State Antitakeover Laws. Each Zynaxis Company shall exerts its best
efforts to take all necessary and reasonably possible steps to assure that the
entering into of the Transaction Documents will not and, upon performance of the
covenants set forth in the Transaction Documents, no facet of the consummation
of the transactions contemplated by the Transaction Documents will:
(a) be prohibited by any provision of the PBCL, including Chapter 25
of the PBCL (the "Antitakeover Laws");
(b) cause any shareholder of Zynaxis to exercise any right or remedy
under the Antitakeover Laws;
(c) cause the rights of CytRx to vote the shares of Vaxcel Common
Stock issued pursuant to this Agreement or to exercise its rights as a
shareholder of Vaxcel with respect to such shares to be impaired by action
of any provision of the Antitakeover Laws or otherwise;
(d) cause CytRx to be subject to any Liability, including any
obligation or potential obligation to pay money or disgorge profits (other
than an obligation to make payments pursuant to Subchapter E of the
Antitakeover Laws), under the provisions of the Antitakeover Laws; or
(e) cause the termination, impairment, modification, or extension of
any Contract to which Zynaxis is a party by action of the provisions of the
Antitakeover Laws.
8.9 Charter Provisions. Each Zynaxis Company shall take all necessary
action to ensure that the entering into of this Agreement and the consummation
of the Merger and the other transactions contemplated by the Transaction
Documents do not and will not result in the grant of any rights to any Person
under the Articles of Incorporation, as amended, Bylaws or other governing
instruments of any Zynaxis Company, except such rights as exist on the date
hereof, or restrict or impair the ability of Vaxcel or any of its Subsidiaries
to vote, or otherwise to exercise the rights of a shareholder with respect to,
shares of any Zynaxis Company that may be directly or indirectly acquired or
controlled by them.
8.10 Cure of Defaults. Zynaxis shall use proceeds from its initial loan
under the Senior Credit Facility to cure all Defaults under the Secretech
License Agreement and the Malvern Lease by 5:00 p.m. on the earlier of: (i)
November 27, 1996 or (ii) the fifth (5th) business day after Zynaxis first
receives money from CytRx pursuant to the Senior Credit Facility, and after such
cure shall not Default under the Secretech License Agreement.
8.11 Negotiation of Malvern Lease Amendment. Zynaxis shall negotiate in
good faith to obtain an amendment to the Malvern Lease and releases from the
Adolor Sublease that are reasonably satisfactory to CytRx.
8.12 Nasdaq Listing. Vaxcel shall use its reasonable efforts to list,
prior to the Effective Time, on the Nasdaq SmallCap Market, the shares of Vaxcel
Common Stock to be issued pursuant to this Agreement and upon exercise of
outstanding warrants and options to purchase shares of Zynaxis Common Stock that
are assumed by Vaxcel in the Merger, and Vaxcel shall give all notices and make
all required filings with the NASD in connection with the transactions
contemplated herein.
8.13 Agreements of Affiliates. Zynaxis has disclosed in Section 8.13 of
the Zynaxis Disclosure Memorandum all Persons whom it reasonably believes is an
"affiliate" of Zynaxis for purposes of Rule 145 under the 1933 Act. Zynaxis
shall use its reasonable efforts to cause each such Person to deliver to Vaxcel
not
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later than 30 days after the date of this Agreement, a written agreement,
substantially in the form of Exhibit 2, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of Zynaxis Capital
Stock held by such Person except as contemplated by such agreement or by this
Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of Vaxcel Common Stock to be received by such Person upon consummation of
the Merger except in compliance with applicable provisions of the 1933 Act and
the rules and regulations thereunder.
8.14 Use of Proceeds of Senior Credit Facility. Zynaxis shall use proceeds
of loans made under the Senior Credit Facility only in accordance with the
Secured Loan Agreement.
8.15 Registration Rights Agreement. At the Closing CytRx and Vaxcel shall
enter into the Registration Rights Agreement.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated by the Transaction Documents are subject to the
satisfaction of the following conditions, unless waived by both Parties pursuant
to Section 11.6:
(a) Shareholder Approval. The holders of Zynaxis Common Stock voting
together with holders of Zynaxis Preferred Stock (on an as-converted basis)
and the holders of Zynaxis Preferred Stock voting as a separate class of
Zynaxis shall have approved (i) the Charter Amendments, (ii) this Agreement
and the consummation of the transactions contemplated hereby, including the
Merger, as and to the extent required by Law, by the provisions of any
governing instruments or by the rules of the NASD, (iii) the sale of
substantially all of the Assets of Zynaxis as contemplated in the
Liquidation Agreement as and to the extent required by Law, the provisions
of any governing instruments, or by the rules of the NASD, and (iv) such
other related matters deemed necessary by the Parties to assure that the
transactions contemplated by the Transaction Documents are permitted under
the Law as and to the extent required by Law, by the provisions of any
governing instruments, or by the rules of the NASD.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including requirements relating to
the raising of additional capital or the disposition of Assets) which in
the reasonable judgment of the Boards of Directors of either CytRx or
Vaxcel would so materially adversely impact the economic or business
benefits of the transactions contemplated by this Agreement that, had such
condition or requirement been known, such Party would not, in its
reasonable judgment, have entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any and
all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b)) or for the preventing of any Default under
any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on such Party. No Consent so obtained which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner which in the reasonable judgment of the Boards of
Directors of either CytRx or Vaxcel would so materially adversely impact
the economic or business benefits of the transactions contemplated by this
Agreement that, had such condition or requirement been known, such Party
would not, in its reasonable judgment, have entered into this Agreement.
(d) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
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preliminary or permanent) or taken any other action which prohibits,
restricts or makes illegal consummation of the transactions contemplated by
this Agreement.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing, and all necessary approvals
under state securities Laws or the 1933 Act or 1934 Act relating to the
issuance or trading of the shares of Vaxcel Common Stock issuable pursuant
to the transaction contemplated by this Agreement shall have been received.
(f) Exchange Listing. The shares of Vaxcel Common Stock issuable
pursuant to the Merger shall have been approved for listing on the Nasdaq
SmallCap Market.
(g) Tax Matters. Each Party shall have received a written opinion of
counsel from Alston & Bird, in form reasonably satisfactory to such Parties
(the "Tax Opinion"), to the effect that for federal income tax purposes the
Contributions in exchange for Vaxcel Common Stock will constitute a
transaction described in Section 351 of the Internal Revenue Code. In
rendering such Tax Opinion, such counsel shall be entitled to rely upon
representations of CytRx, Vaxcel, and Zynaxis reasonably satisfactory in
form and substance to such counsel.
(h) Antitakeover Laws. No facet of the consummation of the
transactions contemplated by the Transaction Documents shall have been
found to:
(i) be prohibited by any provision of the PBCL, including the
Antitakeover Laws;
(ii) cause the rights of CytRx to vote the shares of Vaxcel Common
Stock issued pursuant to this Agreement or to exercise its rights as a
shareholder of Vaxcel with respect to such shares to be impaired by
action of any provision of the Antitakeover Laws or otherwise;
(iii) cause CytRx to be subject to any Liability, including any
obligation or potential obligation to pay money or disgorge profits
(other than an obligation to make payments pursuant to Subchapter E of
the Antitakeover Laws), under the provisions of the Antitakeover Laws;
(iv) cause the termination, impairment, modification or extension
of any Contract to which Zynaxis is a party by action of the provisions
of the Antitakeover Laws; or
(v) except as set forth in Section 8.9 of the Zynaxis Disclosure
Memorandum, result in the grant of any rights to any Person under the
Articles of Incorporation, Bylaws, or other governing instruments of any
Zynaxis Company.
9.2 Conditions to Obligations of CytRx, Vaxcel and Vaxcel Merger Sub. The
obligations of CytRx, Vaxcel and Vaxcel Merger Sub to perform this Agreement and
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction of the following conditions, unless waived by CytRx, Vaxcel
and Vaxcel Merger Sub pursuant to Section 11.6(a):
(a) Representations and Warranties. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of Zynaxis set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties made in Sections 5.18 and 5.19 with respect to officers,
directors, employees and Subsidiaries of Zynaxis shall be true and correct
with respect to all Affiliates of Zynaxis. The representations and
warranties set forth in Section 5.3 shall be true and correct (except for
inaccuracies which are de minimus in amount). The representations and
warranties set forth in Sections 5.19 and 5.20 shall be true and correct in
all material respects. There shall not exist inaccuracies in the
representations and warranties of Zynaxis set forth in this Agreement
(including the representations and warranties set forth in Sections 5.3,
5.19 and 5.20) such that the aggregate effect of such inaccuracies has, or
is reasonably likely to have, a Material Adverse Effect on Zynaxis;
provided that, for purposes of this sentence only,
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those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Zynaxis to be performed and complied with
pursuant to, the Transaction Documents prior to the Effective Time shall
have been duly performed and complied with in all material respects.
(c) Certificates. Zynaxis shall have delivered to Vaxcel (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer, to the effect that the conditions set forth in
Section 9.1 as relates to Zynaxis and in Section 9.2(a) and 9.2(b) have
been satisfied, and (ii) certified copies of resolutions duly adopted by
Zynaxis's Board of Directors and shareholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Vaxcel and its
counsel shall request.
(d) Opinion of Counsel. CytRx and Vaxcel shall have received an
opinion of Morgan, Lewis & Bockius LLP, counsel to Zynaxis, dated as of the
Closing, in form reasonably satisfactory to Vaxcel, as to the matters set
forth in Exhibit 3.
(e) Affiliates Agreements. Vaxcel shall have received from each
affiliate of Zynaxis the affiliates letter referred to in Section 8.13.
(f) Execution of Agreements. The Transaction Documents shall have
been executed and delivered by each of the intended Parties thereto and no
Party shall be in Default thereunder.
(g) Execution of Malvern Lease Amendment. Zynaxis shall have entered
into an amendment to the Malvern Lease that is reasonably satisfactory to
CytRx, Vaxcel and Vaxcel Merger Sub.
(h) Releases from Adolor Lease. Zynaxis shall have obtained releases
from liability under the Adolor Sublease that are satisfactory to CytRx,
Vaxcel and Vaxcel Merger Sub.
(i) Board Resolutions Regarding Zynaxis Options. The Board of
Directors of Zynaxis and all relevant committees thereof shall have adopted
resolutions that in the judgment of CytRx and its counsel are sufficient to
prevent immediate vesting of outstanding Zynaxis Options, to approve the
treatment of outstanding Zynaxis Options in the Merger and to find the
options to be received "comparable" to currently outstanding Zynaxis
Options within the meaning of the Zynaxis Stock Plan.
(j) Dissenters. The holders of shares of Zynaxis Capital Stock having
the right to vote no more than ten percent (10%) of the votes that could be
cast by all holders of Zynaxis Capital Stock voting together as a single
class shall have elected to exercise their statutory dissenters' rights or
their objection rights, if any, under Section 2545 of the PBCL.
(k) Execution of Preferred Stock and Warrant Agreement. Every holder
of shares of Zynaxis Preferred Stock or of Warrants referenced in the
Preferred Stock and Warrant Agreement shall have executed the Preferred
Stock and Warrant Agreement.
9.3 Conditions to Obligations of Zynaxis. The obligations of Zynaxis to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Zynaxis pursuant to Section 11.6(b):
(a) Representations and Warranties. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of Vaxcel set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties set forth in Section 6.3 shall be true and correct (except for
inaccuracies which are de minimus in amount). There shall not exist
inaccuracies in the representations and warranties of Vaxcel set forth in
this Agreement (including the representations and warranties set forth in
Section 6.3) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse
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Effect on Vaxcel; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Vaxcel to be performed and complied with
pursuant to, the Transaction Documents prior to the Effective Time shall
have been duly performed and complied with in all material respects.
(c) Certificates. Vaxcel shall have delivered to Zynaxis (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer, to the effect that the conditions set forth in
Section 9.1 as relates to Vaxcel and in Section 9.3(a) and 9.3(b) have been
satisfied, and (ii) certified copies of resolutions duly adopted by CytRx's
Board of Directors, Vaxcel's Board of Directors, CytRx as sole shareholder
of Vaxcel, Vaxcel Merger Sub's Board of Directors and Vaxcel as sole
shareholder of Vaxcel Merger Sub evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated
hereby, all in such reasonable detail as Zynaxis and its counsel shall
request.
(d) Opinion of Counsel. Zynaxis shall have received an opinion of
Alston & Bird, counsel to CytRx and Vaxcel, dated as of the Effective Time,
in form reasonably acceptable to Zynaxis, as to the matters set forth in
Exhibit 4.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the shareholders of
Zynaxis, this Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) By mutual consent of CytRx and Zynaxis; or
(b) By either CytRx or Zynaxis (provided that the terminating Party is
not then in material breach of any representation, warranty, covenant, or
other agreement contained in this Agreement) in the event of a material
breach by the other Party of any representation or warranty contained in
this Agreement which cannot be or has not been cured within 30 days after
the giving of written notice to the breaching Party of such breach and
which breach is reasonably likely, in the opinion of the non-breaching
Party, to have, individually or in the aggregate, a Material Adverse Effect
on the breaching Party; or
(c) By either CytRx or Zynaxis (provided that the terminating Party is
not then in material breach of any representation, warranty, covenant, or
other agreement contained in this Agreement) in the event of a material
breach by the other Party of any covenant or agreement contained in this
Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such breach; or
(d) By either CytRx or Zynaxis (provided that the terminating Party is
not then in material breach of any representation, warranty, covenant, or
other agreement contained in this Agreement) in the event (i) any Consent
of any Regulatory Authority required for consummation of the Merger and the
other transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
shareholders of Zynaxis fail to vote their approval of the matters relating
to this Agreement and the transactions contemplated hereby at the
Shareholders' Meeting where such matters were presented to such
shareholders for approval and voted upon; or
(e) By any Party in the event that the Merger shall not have been
consummated by March 31, 1997, if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by
any breach of this Agreement by the Party electing to terminate pursuant to
this Section 10.1(e); or
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(f) By either CytRx or Zynaxis (provided that the terminating Party is
not then in material breach of any representation, warranty, covenant, or
other agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section
10.1(e).
10.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article 11 and Section 8.5(b) shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 10.1(b), 10.1(c) or
10.1(f) shall not relieve the breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving rise
to such termination.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 1, 2, 3, 4 and 11.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving the
acquisition of such Party or any of its Subsidiaries or the acquisition of
a substantial equity interest in, or a substantial portion of the assets
of, such Party or any of its Subsidiaries.
"ADOLOR SUBLEASE" shall mean that certain Sublease Agreement dated May
15, 1996 between Zynaxis, Inc. and Adolor Corporation, as amended.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"AFFILIATE SHARES" shall mean the shares of Vaxcel Common Stock to be
issued to the holders of Zynaxis Common Stock and Zynaxis Preferred Stock
in accordance with Section 3.1 hereof who are "affiliates" of Zynaxis for
purposes of Rule 145 under the 1933 Act as set forth in Section 8.13 of the
Zynaxis Disclosure Memorandum.
"AGREEMENT" shall mean this Agreement and Plan of Merger and
Contribution, including the Exhibits and Disclosure Memoranda delivered
pursuant hereto and incorporated herein by reference.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be executed
by Zynaxis and filed in the Department of State of the Commonwealth of
Pennsylvania relating to the Merger as contemplated by Section 1.5.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly,
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in whole or in part, whether or not carried on the books and records of
such Person, and whether or not owned in the name of such Person or any
Affiliate of such Person and wherever located.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger to be
executed by Zynaxis and filed with the Secretary of State of the State of
Georgia relating to the Merger as contemplated by Section 1.5.
"CHARTER AMENDMENTS" shall mean the proposals substantially in the
form attached hereto at Exhibit 5 to be submitted to the shareholders of
Zynaxis in connection with the transactions contemplated by this Agreement.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CONFIDENTIALITY AGREEMENT" shall mean that certain Confidentiality
Agreement, dated September 18, 1996, between Zynaxis and CytRx.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets or business.
"CONTRIBUTIONS" shall mean the contribution of the Cash Payment and
the Senior Credit Facility and conversion of the Zynaxis shares, as
provided in Section 1.1 hereof.
"DEFAULT" shall mean (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit,
(ii) any occurrence of any event that with the passage of time or the
giving of notice or both would constitute a breach or violation of, default
under, contravention of, or conflict with, any Contract, Law, Order, or
Permit, or (iii) any occurrence of any event that with or without the
passage of time or the giving of notice would give rise to a right of any
Person to exercise any remedy or obtain any relief under, terminate or
revoke, suspend, cancel, or modify or change the current terms of, or
renegotiate, or to accelerate the maturity or performance of, or to
increase or impose any Liability under, any Contract, Law, Order, or
Permit, where, in any such event, such Default is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on a
Party.
"DGCL" shall mean the Delaware General Corporation Law, as amended.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
discharges, releases, or threatened releases of any Hazardous Material, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of any Hazardous
Material.
"EQUITY RIGHTS" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever relating
to, or securities or rights convertible into or exchangeable for, shares of
the capital stock of a Person or by which a Person is or may be bound to
issue additional shares of its capital stock or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE RATIO" shall mean: (i) the number of shares of Vaxcel Common
Stock held by CytRx immediately prior to the Closing, giving effect to the
issuance of shares to CytRx in connection with the
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Closing pursuant to Section 1.2 of this Agreement, divided by (ii) seven
(7) and further divided by (iii) the sum of (A) the number of shares of
Zynaxis Common Stock outstanding immediately prior to the Closing, giving
effect to all issuances of common stock to which Zynaxis is committed as of
the time of Closing other than issuances to occur upon the exercise of
outstanding stock options and warrants including but not limited to: (I)
the delivery of Thirty Four Thousand Five Hundred Forty-Eight (34,548)
shares of common stock of Zynaxis to John Chappell pursuant to the
settlement agreement set forth in the letter from Zynaxis to John Chappell
dated October 10, 1996, and (II) the issuance of approximately Six Thousand
(6,000) additional shares of Zynaxis common stock to the Zynaxis 401(k)
plan for the fourth quarter of 1996, (B) two times the number of shares of
Zynaxis Preferred Stock outstanding as of the Closing, and (C) 1,320,706.
The number 1,320,706 will be adjusted for splits and reverse splits of
Vaxcel Common Stock, e.g., if Vaxcel effects a 1-for-2 reverse stock split
the number 1,320,706 shall be deemed changed to 660,353, etc. An example
calculation of the Exchange Ratio based on current information is attached
as Exhibit 6.
"EXHIBITS" 1 through 19, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code, as amended.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"INTELLECTUAL PROPERTY" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor,
technology rights and licenses, computer software (including any source or
object codes therefor or documentation relating thereto), trade secrets,
franchises, know-how, inventions, and other intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"INVENTORY" shall mean (a) all inventory of Zynaxis and all goods
intended for sale or lease by Zynaxis, or for display or demonstration; (b)
all work-in-process; (c) all raw materials and other materials and supplies
of every nature and description used or which might be used in connection
with the manufacture, packing, shipping, advertising, selling, leasing or
furnishing of such goods or otherwise used or consumed in Zynaxis's
business; and (d) all documents relating to any of the foregoing.
"KNOWLEDGE" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean the personal
knowledge after due inquiry of the chairman, president, chief financial
officer, chief accounting officer, chief operating officer, general
counsel, any assistant or deputy general counsel, or any senior, executive
or other vice president of such Person and the knowledge of any such
persons obtained or which would have been obtained from a reasonable
investigation.
"LAW" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities, or business, including those
promulgated, interpreted or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts
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presented for collection or deposit in the ordinary course of business) of
any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, and (iii) Liens which do not materially
impair the use of or title to the Assets subject to such Lien.
"LIQUIDATION AGREEMENT" shall mean that certain agreement in the form
attached hereto as Exhibit 7 being entered into simultaneously with the
execution of this Agreement between Zynaxis and CytRx regarding the sale of
assets and settlement of liabilities of Zynaxis.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other examination
or investigation, hearing, administrative or other proceeding relating to
or affecting a Party, its business, its Assets (including Contracts related
to it), or the transactions contemplated by this Agreement.
"LOCK-UP SHARES" shall mean the shares of Vaxcel Common Stock to be
issued to the holders of Zynaxis Common Stock and Zynaxis Preferred Stock
in accordance with Section 3.1 hereof who are parties to the Shareholder
Voting Agreement.
"MALVERN LEASE" shall mean that certain Agreement of Lease dated
August 30, 1988 between Rouse & Associates and Zynaxis Cell Science, Inc.,
as amended.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries,
taken as a whole, or (ii) the ability of such Party to perform its
obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that "Material
Adverse Effect" shall not be deemed to include the impact of (a) changes in
Laws of general applicability or interpretations thereof by courts or
governmental authorities, (b) changes in generally accepted accounting
principles or regulatory accounting principles, (c) actions and omissions
of a Party (or any of its Subsidiaries) taken with the prior informed
written Consent of the other Party in contemplation of the transactions
contemplated hereby, and (d) the direct effects of compliance with this
Agreement on the operating performance of the Parties, including expenses
incurred by the Parties in consummating the transactions contemplated by
this Agreement.
"MERGER SHARES" shall mean the shares of Vaxcel Common Stock to be
issued to the holders of Zynaxis Common Stock and Zynaxis Preferred Stock
in accordance with Section 3.1 hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ SMALLCAP MARKET" shall mean the SmallCap Market System of the
National Association of Securities Dealers Automated Quotations System.
"NOTE EXCHANGE AGREEMENT" shall mean that certain Note Exchange
Agreement on the form attached hereto as Exhibit 8 being entered into
simultaneously with the execution of this Agreement by and among Zynaxis,
CytRx, Vaxcel, Euclid Partners III, L.P. and S.R. One, Ltd.
"OPERATING PROPERTY" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in which
such Party or Subsidiary holds a security interest or other interest
(including an interest in a fiduciary capacity), and, where required by the
context, includes the owner or operator of such property, but only with
respect to such property.
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"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"PARTY" shall mean any of CytRx, Zynaxis, Vaxcel, or Vaxcel Merger
Sub, and "PARTIES" shall mean CytRx, Zynaxis, Vaxcel, and Vaxcel Merger
Sub.
"PBCL" shall mean the Pennsylvania Business Corporation Law, as
amended.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, or business.
"PER SHARE PRICE" shall mean: (i) Four Million Dollars
($4,000,000.00), divided by (ii) the sum of (A) the number of shares of
Zynaxis Common Stock outstanding immediately prior to the Closing, giving
effect to all issuances of common stock to which Zynaxis is committed as of
the time of Closing other than issuances to occur upon the exercise of
outstanding stock options and warrants including but not limited to: (I)
the delivery of Thirty Four Thousand Five Hundred Forty-Eight (34,548)
shares of common stock of Zynaxis to John Chappell pursuant to the
settlement agreement set forth in the letter from Zynaxis to John Chappell
dated October 10, 1996, and (II) the issuance of approximately Six Thousand
(6,000) additional shares of Zynaxis common stock to the Zynaxis 401(k)
plan for the fourth quarter of 1996, (B) two times the number of shares of
Zynaxis Preferred Stock outstanding immediately prior to the Closing, and
(C) 1,320,706. The number 1,320,706 will be adjusted for splits and reverse
splits of Vaxcel Common Stock, e.g., if Vaxcel effects a 1-for-2 reverse
stock split the number 1,320,706 shall be deemed changed to 660,353, etc.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"PREFERRED STOCK AND WARRANT AGREEMENT" shall mean the Preferred Stock
and Warrant Agreement in the form attached hereto as Exhibit 9.
"PROXY STATEMENT" shall mean the proxy statement used by Zynaxis to
solicit the approval of its shareholders of the transactions contemplated
by this Agreement, which shall include the prospectus of Vaxcel relating to
the issuance of the Vaxcel Common Stock to holders of Zynaxis Common Stock.
"REGISTRATION RIGHTS AGREEMENT" shall mean that certain Registration
Rights Agreement in the form attached hereto as Exhibit 10 to be entered
into at the Closing between CytRx and Vaxcel, pursuant to which CytRx and
Vaxcel make certain agreements regarding the registration for resale under
the 1933 Act of Shares of Vaxcel Common Stock held by CytRx.
"REGISTRATION STATEMENT" shall mean the Registration Statement(s) on
Form S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by
Vaxcel under the 1933 Act to register the issuance of the Merger Shares and
to register the resale of the Resale Shares.
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC, the NASD,
the Federal Trade Commission, the United States Department of Justice, and
all other federal, state, county, local or other governmental or regulatory
agencies, authorities (including self-regulatory authorities),
instrumentalities, commissions, boards or bodies having jurisdiction over
the Parties and their respective Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative engaged by a
Person.
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"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"SECRETECH LICENSE AGREEMENT" shall mean that certain License
Agreement dated July 1, 1987 between Southern Research Institute and
Molecular Engineering Associates, Ltd.
"SECURED LOAN AGREEMENT" shall mean that certain Secured Loan
Agreement in the form attached hereto as Exhibit 11 being entered into
simultaneously with the execution of this Agreement between CytRx and
Zynaxis.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"SENIOR CREDIT FACILITY" shall mean, collectively, the Secured Loan
Agreement, the Senior Secured Note, the Zynaxis Pledge Agreement, the
Zynaxis Security Agreement, the Zynaxis Vaccine Technologies Guaranty, the
Zynaxis Vaccine Technologies Security Agreement and the Zynaxis Vaccine
Technologies Collateral Assignment of License Agreement.
"SENIOR SECURED NOTE" shall mean that certain Secured Promissory Note
in the form attached hereto as Exhibit 12 being entered into simultaneously
with the execution of this Agreement by Zynaxis, as the maker, and CytRx,
as the holder, outlining the terms governing the lending of up to Two
Million Dollars ($2,000,000) by CytRx to Zynaxis.
"SHAREHOLDER VOTING AGREEMENT" shall mean the Shareholder Voting
Agreement in the form attached hereto as Exhibit 13 being entered into
simultaneously with the execution of this Agreement.
"SHAREHOLDERS' MEETING" shall mean the meeting of the shareholders of
Zynaxis to be held pursuant to Section 8.1, including any adjournment or
adjournments thereof.
"STATEMENT WITH RESPECT TO SHARES" shall mean the Statement With
Respect to Shares filed by Zynaxis in the Department of State of the
Commonwealth of Pennsylvania on April 6, 1995.
"SUBSIDIARIES" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which 50% or more of
the outstanding equity securities is owned directly or indirectly by its
parent (provided, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), (ii)
in the case of partnerships, serves as a general partner, (iii) in the case
of a limited liability company, serves as a managing member, or (iv)
otherwise has the ability to elect a majority of the directors, trustees or
managing members thereof.
"SURVIVING CORPORATION" shall mean Zynaxis as the surviving
corporation resulting from the Merger.
"TAX RETURN" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county, local, or
foreign taxes, charges, fees, levies, imposts, duties, or other
assessments, including income, gross receipts, excise, employment, sales,
use, transfer, license, payroll, franchise, severance, stamp, occupation,
windfall profits, environmental, federal highway use, commercial rent,
customs duties, capital stock, paid-up capital, profits, withholding,
Social Security, single business and unemployment, disability, real
property, personal property, registration, ad valorem, value added,
alternative or add-on minimum, estimated, or other tax or governmental fee
of any kind whatsoever, imposed or required to be withheld by the United
States or any state, county, local or
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foreign government or subdivision or agency thereof, including any
interest, penalties, and additions imposed thereon or with respect thereto.
"TECHNOLOGY DEVELOPMENT AGREEMENT" shall mean that certain Technology
Development Agreement in the form attached hereto as Exhibit 14 being
entered into simultaneously with the execution of this Agreement between
Vaxcel and Zynaxis regarding the joint development of the technology that
is the subject of the Secretech License Agreement by Vaxcel and Zynaxis.
"TRANSACTION DOCUMENTS" shall mean this Agreement and the other
documents executed by any of CytRx, Vaxcel, Vaxcel Merger Sub or Zynaxis
that are referenced by this Agreement.
"VAXCEL CAPITAL STOCK" shall mean, collectively, the Vaxcel Common
Stock and any other class or series of capital stock of Vaxcel.
"VAXCEL COMMON STOCK" shall mean the $0.001 par value common stock of
Vaxcel.
"VAXCEL COMPANIES" shall mean, collectively, Vaxcel and all Vaxcel
Subsidiaries.
"VAXCEL DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Vaxcel, Inc. Disclosure Memorandum" delivered prior to the date
of this Agreement to Zynaxis describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made. Information disclosed with respect to one Section
shall not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
"VAXCEL FINANCIAL STATEMENTS" shall mean (i) the balance sheets of
Vaxcel as of December 31, 1995 and 1994, and the related statements of
operations, changes in shareholders' equity, and cash flows for each of the
three fiscal years ended December 31, 1995, 1994 and 1993, and (ii) the
balance sheet of Vaxcel as of September 30, 1996 and the related statements
of operations, changes in shareholders' equity, and cash flows with respect
to the nine-month period then ended.
"VAXCEL MERGER SUB COMMON STOCK" shall mean the $0.01 par value common
stock of Vaxcel Merger Sub.
"VAXCEL PREFERRED STOCK" shall mean the $.001 par value preferred
stock of Vaxcel.
"VAXCEL SUBSIDIARIES" shall mean the Subsidiaries of Vaxcel, which
shall include the Vaxcel Subsidiaries described in Section 6.4 and any
corporation or other organization acquired as a Subsidiary of Vaxcel in the
future and held as a Subsidiary by Vaxcel at the Effective Time.
"WARRANT SHARES" shall mean the shares of Vaxcel Common Stock issuable
upon the exercise of warrants to purchase Vaxcel Common Stock to be assumed
by Vaxcel or issued by Vaxcel, as the case may be, in accordance with
Sections 3.6 and 3.7 hereof.
"ZYNAXIS CAPITAL STOCK" shall mean, collectively, the Zynaxis Common
Stock, the Zynaxis Preferred Stock, and any other class or series of
capital stock of Zynaxis.
"ZYNAXIS COMMON STOCK" shall mean the $0.01 par value common stock of
Zynaxis.
"ZYNAXIS COMPANIES" shall mean, collectively, Zynaxis and all Zynaxis
Subsidiaries.
"ZYNAXIS DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Zynaxis, Inc. Disclosure Memorandum" delivered prior to the date
of this Agreement to Vaxcel describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made. Information disclosed with respect to one Section
shall not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
"ZYNAXIS FINANCIAL STATEMENTS" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Zynaxis as of
June 30, 1996, and as of December 31, 1995 and 1994, and the related
statements of operations, changes in stockholders' equity, and cash flows
(including related
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notes and schedules, if any) for the six months ended June 30, 1996, and
for each of the three fiscal years ended December 31, 1995, 1994 and 1993,
as filed by Zynaxis in SEC Documents, and (ii) the consolidated balance
sheets of Zynaxis (including related notes and schedules, if any) and
related statements of operations, changes in shareholders' equity, and cash
flows (including related notes and schedules, if any) included in SEC
Documents filed with respect to periods ended subsequent to June 30, 1996.
"ZYNAXIS PLEDGE AGREEMENT" shall mean that certain Pledge Agreement in
the form attached hereto as Exhibit 15 being entered into simultaneously
with the execution of this Agreement between Zynaxis, as pledgor, and
CytRx, as pledgee, pursuant to which Zynaxis pledges the stock of its
Subsidiaries to CytRx as security in connection with the lending of funds
under the Senior Secured Note.
"ZYNAXIS PREFERRED STOCK" shall mean the no par value Series A
Convertible Preferred Stock of Zynaxis.
"ZYNAXIS SECURITY AGREEMENT" shall mean that certain Security
Agreement in the form attached hereto as Exhibit 16 being entered into
simultaneously with the execution of this Agreement between Zynaxis, as
debtor, and CytRx, as secured party, pursuant to which Zynaxis grants to
CytRx a security interest in certain of Zynaxis assets in connection with
the lending of funds under the Senior Secured Note.
"ZYNAXIS STOCK PLAN" shall mean the Zynaxis, Inc. Amended and Restated
1989 Stock Option Plan.
"ZYNAXIS SUBSIDIARIES" shall mean the Subsidiaries of Zynaxis, which
shall include the Zynaxis Subsidiaries described in Section 5.4 and any
corporation or other organization acquired as a Subsidiary of Zynaxis in
the future and held as a Subsidiary by Zynaxis at the Effective Time.
"ZYNAXIS VACCINE TECHNOLOGIES COLLATERAL ASSIGNMENT OF LICENSE
AGREEMENT" shall mean that certain Collateral Assignment of License
Agreement in the form attached hereto as Exhibit 17 being entered into
simultaneously with the execution of this Agreement between CytRx and
Zynaxis Vaccine Technologies, Inc., pursuant to which Zynaxis Vaccine
Technologies, Inc. grants to CytRx a security interest in its license of
certain technology from Southern Research Institute.
"ZYNAXIS VACCINE TECHNOLOGIES GUARANTY" shall mean that certain
Guaranty in the form attached hereto as Exhibit 18 being entered into
simultaneously with the execution of this Agreement between Zynaxis Vaccine
Technologies, Inc., as guarantor and CytRx Corporation.
"ZYNAXIS VACCINE TECHNOLOGIES SECURITY AGREEMENT" shall mean that
certain Security Agreement in the form attached hereto as Exhibit 19 being
entered into simultaneously with the execution of this Agreement between
Zynaxis Vaccine Technologies, Inc., as guarantor and CytRx Corporation.
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(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
<TABLE>
<S> <C>
Cash Payment Section 1.1
Certificates Section 4.1
Closing Section 1.4
CytRx Warrant Section 1.2
Effective Time Section 1.5
ERISA Affiliate Section 5.14(c)
Exchange Agent Section 4.1
Merger Section 1.3
Non-Financing Warrants Section 3.7
Resale Shares Section 8.1
Tax Opinion Section 9.1(g)
Vaxcel Benefit Plans Section 6.14
Vaxcel Contracts Section 6.15
Vaxcel ERISA Plan Section 6.142
Vaxcel Pension Plan Section 6.14
Zynaxis Benefit Plans Section 5.14
Zynaxis Contracts Section 5.15
Zynaxis ERISA Plan Section 5.14
Zynaxis Options Section 3.5
Zynaxis Pension Plan Section 5.14
Zynaxis SEC Reports Section 5.5(a)
</TABLE>
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Any masculine or neuter personal
pronoun shall be considered to mean the corresponding masculine, feminine or
neuter personal pronoun, as the context requires. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses.
(a) Except as otherwise provided in this Section 11.2, each of the Parties
shall bear and pay all direct costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including filing,
registration and application fees, printing fees, and fees and expenses of its
own financial or other consultants, investment bankers, accountants, and
counsel, except that: (i) each of the Parties shall bear and pay one-half of the
filing fees payable in connection with the Registration Statement and the Proxy
Statement and printing costs incurred in connection with the printing of the
Registration Statement and the Proxy Statement; and (ii) Zynaxis shall pay all
fees and expenses of counsel to CytRx and Vaxcel. Notwithstanding the foregoing,
if this Agreement is terminated for any reason other than as set forth in
Section 11.2(b) below then the amount of fees and expenses of Alston & Bird paid
by Zynaxis through the date of termination shall be deducted from the balance
due under the Senior Credit Facility.
(b) Notwithstanding the foregoing,
(i) if this Agreement is terminated by CytRx pursuant to Section
10.1(d)(ii) (as relates to approval of Zynaxis's shareholders), or
(ii) if the Merger is not consummated as a result of the failure, due
to intentional action or inaction on the part of Zynaxis or any of its
officers, directors, employees or agents of Zynaxis to satisfy any of the
conditions set forth in Section 9.2, other than Section 9.2(d), or,
(iii) if this Agreement is terminated for any reason after the Board
of Directors of Zynaxis takes any action in reliance upon the first clause
of the second sentence of Section 8.7 or either of the parenthetical
phrases in clauses (iii) and (iv) of the penultimate sentence of Section
8.1,
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then Zynaxis shall promptly pay CytRx all the out-of-pocket costs and expenses
of CytRx and its Subsidiaries, including reasonable costs of counsel, investment
bankers, actuaries and accountants, incurred in connection with the transactions
contemplated by this Agreement.
(c) In addition to the foregoing, if, after the date of this Agreement and
within twelve (12) months following
(i) any termination of this Agreement
(1) by CytRx pursuant to Sections 10.1(b), 10.1(c), 10.1(f) (but
only on the basis of the failure of Zynaxis to satisfy any of the
conditions enumerated in Section 9.2, other than Section 9.2(d)), or
(2) by either Party pursuant to Section 10.1(d)(ii) (with respect
to approval of the shareholders of Zynaxis), or
(ii) failure to consummate the Merger by reason of any failure of
Zynaxis to satisfy the conditions enumerated in Section 9.2, other than
Section 9.2(d), or 9.1(a) (as such section relates to approval by the
shareholders of Zynaxis),
any third-party shall acquire, merge with, combine with, purchase a substantial
part of the Assets of, or engage in any other business combination with, or
purchase any equity securities involving an acquisition of 20% or more of the
voting stock of, Zynaxis, or enter into any binding agreement to do any of the
foregoing (collectively, a "Business Combination"), such third-party that is a
party to the Business Combination shall pay to CytRx, prior to the earlier of
consummation of the Business Combination or execution of any letter of intent or
definitive agreement with Zynaxis relating to such Business Combination, an
amount in cash equal to the sum of
(x) the direct costs and expenses or portion thereof referred to in
subsection (a) above incurred by or on behalf of CytRx or Vaxcel in
connection with the transactions contemplated by this Agreement, plus
(y) 5% of the aggregate fair market value of the consideration
received by the shareholders of Zynaxis in such Business Combination, less
(z) any amounts previously paid by Zynaxis to CytRx or Vaxcel pursuant
to subsection (b) of this Section 11.2,
which sum represents additional compensation for CytRx's loss as the result of
the transactions contemplated by this Agreement not being consummated. In the
event such third-party shall refuse to pay such amounts within ten days of
demand therefor by CytRx, the amounts shall be an obligation of Zynaxis and
shall be paid by Zynaxis promptly upon notice to Zynaxis by CytRx.
(d) The Parties acknowledge that the loss to either Party resulting from
breach of this Agreement by the other Party or other failure of the transactions
contemplated by this Agreement to be consummated is not susceptible of ready
measurement and, therefore, that the payments provided in this Section 11.2 are
intended by the Parties to constitute liquidated damages for any breach by a
Party of the terms of this Agreement, and not a penalty.
11.3 Brokers and Finders. With the exception of the agreement established
by a letter dated June 17, 1996 from QED Technologies, L.P., to CytRx
Corporation, as amended by that letter dated November 8, 1996 From Vaxcel, Inc.
to QED Technologies, L.P., for which Vaxcel shall be responsible, each of the
Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his or its representing or being retained by or
allegedly representing or being retained by Zynaxis or Vaxcel, each of Zynaxis
and Vaxcel, as the case may be, agrees to indemnify and hold the other Party
harmless of and from any Liability in respect of any such claim.
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11.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except, as to Section
8.5(b), for the Confidentiality Agreement). Nothing in this Agreement expressed
or implied, is intended to confer upon any Person, other than the Parties or
their respective successors, any rights, remedies, obligations, or liabilities
under or by reason of this Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of each of the Parties, whether before or after shareholder approval of this
Agreement has been obtained; provided, that after any such approval by the
holders of Zynaxis Capital Stock, there shall be made no amendment that reduces
or modifies in any material respect the consideration to be received by holders
of Zynaxis Capital Stock or pursuant to applicable Law requires the further
approval by such shareholders without the further approval of such shareholders.
11.6 Waivers.
(a) Prior to or at the Effective Time, Vaxcel, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
Zynaxis, to waive or extend the time for the compliance or fulfillment by
Zynaxis of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of Vaxcel under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing signed
by a duly authorized officer of Vaxcel.
(b) Prior to or at the Effective Time, Zynaxis, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
Vaxcel, to waive or extend the time for the compliance or fulfillment by Vaxcel
of any and all of its obligations under this Agreement, and to waive any or all
of the conditions precedent to the obligations of Zynaxis under this Agreement,
except any condition which, if not satisfied, would result in the violation of
any Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of Zynaxis.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other
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address as may be provided hereunder), and shall be deemed to have been
delivered as of the date so delivered:
Zynaxis: Zynaxis, Inc.
371 Phoenixville Pike
Malvern, Pennsylvania 19355
Telecopy Number: (610) 889-2222
Attention: Martyn D. Greenacre
Chairman, President and
Chief Executive Officer
Copy to Counsel: Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103-6993
Telecopy Number: (215) 963-5299
Attention: Debra J. Poul
CytRx: CytRx Corporation
154 Technology Parkway
Norcross, Georgia 30092
Telecopy Number: (770) 448-3357
Attention: Jack J. Luchese
Chairman, President and
Chief Executive Officer
Copy to Counsel: Alston & Bird
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: George M. Maxwell, Jr.
Vaxcel: Vaxcel, Inc.
154 Technology Parkway
Norcross, Georgia 30092
Telecopy Number: (770) 368-9500
Attention: Paul Wilson
Copy to Counsel: Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Telecopy Number: (404) 881-7777
Attention: George M. Maxwell, Jr.
11.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Georgia, without regard to any
applicable conflicts of Laws.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions; Articles and Sections. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
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11.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all Parties
hereto.
11.13 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed
on its behalf and its corporate seal to be hereunto affixed and attested by
officers thereunto as of the day and year first above written.
<TABLE>
<S> <C>
ATTEST: VAXCEL, INC.
By:
- -------------------------------------------- -----------------------------------------
Secretary Paul J. Wilson, III
President and Chief Executive Officer
[CORPORATE SEAL]
ATTEST: VAXCEL MERGER SUBSIDIARY, INC.
By:
- -------------------------------------------- -----------------------------------------
Secretary Paul J. Wilson, III
President and Chief Executive Officer
[CORPORATE SEAL]
ATTEST: Zynaxis, Inc.
By:
- -------------------------------------------- -----------------------------------------
Secretary Martyn D. Greenacre
Chairman, President and Chief Executive
Officer
[CORPORATE SEAL]
ATTEST: CYTRX CORPORATION
By:
- -------------------------------------------- -----------------------------------------
Secretary
[CORPORATE SEAL]
</TABLE>
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<PAGE> 172
APPENDIX B
December 6, 1996
Mr. Martyn D. Greenacre
Chairman and CEO
Zynaxis, Inc.
371 Phoenixville Pike
Malvern, PA 19355
Dear Martyn:
We understand that the Board of Directors of Zynaxis (the "Company") has
approved the sale of the assets listed in Exhibit A attached hereto (the
"Assets") for prices no less than the values indicated for such assets on
Exhibit A and the settlement of the liabilities listed in Exhibit B attached
hereto (the "Liabilities") for amounts no greater than the amounts indicated on
Exhibit B (collectively, the "Transactions"). We further understand that the
Board of Directors (and any applicable committees thereof) of Zynaxis have
approved: (i) the operating budget attached as Exhibit C for the period between
the date of this letter and the closing of the proposed business combination
transaction between the Company and CytRx Corporation, (ii) the agreements to be
entered into by the Company and CytRx Corporation with Martyn D. Greenacre and
Michael A. Christie attached as Exhibit D and Exhibit E, respectively, and (iii)
the agreement between QED and Zynaxis covering QED's relationship as Zynaxis's
agent for the sale of the Cauldron Division attached as Exhibit F.
1. The Company will exert its commercially reasonable best efforts to sell
the Assets and to cooperate with CytRx Corporation in its efforts to assist you
in selling the Assets. The Company shall approve and execute documents
evidencing and perform any agreement negotiated by the Company or us with any
prospective purchaser of any Asset if (a) the purchase price is no lower than
the amount and is consistent with the terms set forth for such Asset in Exhibit
A, and (b) the other terms and conditions of the Transaction are not less
favorable to the Company in any material respect than the terms and conditions
of similar transactions.
2. The Company will exert its commercially reasonable best efforts to
settle the Liabilities and to cooperate with CytRx Corporation in its efforts to
assist you in settling the Liabilities. The Company shall approve and execute
documents evidencing and perform any agreement negotiated by the Company or us
with any creditor for any Liability, if (a) the cash payment required to be paid
by the Company to such creditor is no greater than the settlement amount and is
consistent with the terms set forth for such Liability in Exhibit B, and (b) the
other terms and conditions of the Transaction are not less favorable to the
Company in any material respect than the terms and conditions of similar
transactions.
3. Subject to approval by the Committee (as defined below), which approval
shall not be unreasonably withheld, the Company shall approve and execute
documents evidencing and perform any agreement negotiated by us with any
counsel, accountants, appraisers, brokers and other advisors in connection with
the Transactions (all for the account of the Company), if (a) such person is not
an affiliate of ours, and (b) the terms and conditions of such agreement, taken
as a whole, are fair to the Company.
4. In connection with our activities on your behalf, the Company agrees to
cooperate with us, to furnish or cause to be furnished to us such information
and data as we may reasonably request, and to give us reasonable access to the
Company's officers, directors, employees, appraisers and independent
accountants. The Company represents that all information made available to us by
the Company will be complete and correct in all material respects and will not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in light of the
circumstances under which such statements are made.
5. The Board of Directors of the Company (the "Board") shall establish a
committee (the "Committee") of the Board consisting of John Chappell, Stephen
Reidy and Martyn Greenacre, which shall have full
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<PAGE> 173
authority of the Board to authorize the Transactions and the institution and
prosecution of actions (including arbitration proceedings) relating to the
Transactions. The Committee shall confer with us at such times as we reasonably
request.
6. The Company shall reimburse us promptly for all reasonable out-of-pocket
expenses, including reasonable fees and expenses of our counsel, incurred in
connection with the rendering of our services hereunder.
7. The benefits of this Agreement shall inure to the respective successors
and assigns of the parties hereto and of the Indemnified Persons referred to in
the attached indemnification provisions, and the obligations and liabilities
assumed in this Agreement by the parties hereto shall be binding upon their
respective successors and assigns.
8. The Company agrees to indemnify us in accordance with the
indemnification provisions attached as Exhibit G hereto, which are incorporated
herein by reference and made a part hereof.
9. We may terminate this Agreement at any time upon written notice, without
liability or continuing obligation to you. The Company may not terminate this
Agreement unless and until the Agreement and Plan of Merger and Contribution
dated as of the date hereof between us and the Company is terminated. Neither
termination nor completion of this assignment shall affect the provisions of
paragraphs 6 and 8, which shall remain operative and in full force and effect
until 5:00 p.m. Eastern time on the third anniversary of the execution of this
Agreement.
10. The validity and interpretation of this Agreement shall be governed by,
and construed and enforced in accordance with, the substantive laws of the State
of Delaware applicable to agreements made and to be fully performed therein.
This agreement may not be modified or amended except in writing signed by the
parties hereto. Nothing in this Agreement, expressed or implied, is intended to
confer upon any person, other than the parties hereto or their respective
successors, any rights, remedies, obligations or liabilities under or by reason
of this Agreement. The parties acknowledge that this Agreement is not to be
construed as creating a partnership or joint venture between the parties hereto.
If the above terms are in accordance with our understanding, please sign
the enclosed copy of this letter and return it to us.
Very truly yours,
CYTRX CORPORATION
By:
------------------------------------
JACK J. LUCHESE
President and Chief Executive
Officer
Confirmed and Agreed to this
6th day of December, 1996:
ZYNAXIS, INC.
By:
----------------------------------
MARTYN D. GREENACRE
Chairman and Chief Executive
Officer
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<PAGE> 174
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit A -- Assets to be Sold
Exhibit B -- Liabilities to be Settled
Exhibit C -- Operating Budget
Exhibits D and E -- Agreements with Greenacre and Christie
Exhibit F -- Agreement with QED
Exhibit G -- Indemnification Provisions
</TABLE>
<PAGE> 175
APPENDIX C
<TABLE>
<S> <C>
Microfilm Number Filed with the Department of State on
------------------------ ---------
Entity Number
------------------------ -----------------------------------------------
Secretary of the Commonwealth
</TABLE>
ARTICLES OF AMENDMENT -- DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 91)
In compliance with the requirements of 15 Pa.C.S. sec. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: Zynaxis, Inc.
----------------------------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and the
county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) 371 Phoenixville Pike Malvern Pennsylvania 19355 Chester
-------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
---------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
3. The statute by or under which it was incorporated is: The Pennsylvania
---------------------
Business Corporation Law of 1988, as amended
---------------------------------------------------------------------------
4. The date of its incorporation is: March 5, 1987
-----------------------------------------
5. (CHECK, AND IF APPROPRIATE COMPLETE, ONE OF THE FOLLOWING):
[X] The amendment shall be effective upon filing these Articles of Amendment
in the Department of State.
[ ] The amendment shall be effective on: at
--------------- ------------------
Date Hour
6. (CHECK ONE OF THE FOLLOWING):
[X] The amendment was adopted by the shareholders (or members) pursuant to 15
Pa.C.S. sec. 1914(a) and (b).
[ ] The amendment was adopted by the board of directors pursuant to 15 Pa.C.S.
sec. 1914(c).
7. (CHECK, AND IF APPROPRIATE COMPLETE, ONE OF THE FOLLOWING):
[ ] The amendment adopted by the corporation, set forth in full, is as
follows:
[X] The amendment adopted by the corporation is set forth in full in Exhibit A
attached hereto and made a part hereof.
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<PAGE> 176
8. (CHECK IF THE AMENDMENT RESTATES THE ARTICLES):
[ ] The restated Articles of Incorporation supersede the original Articles and
all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer thereof this ______ day
of ______, 19__.
Zynaxis, Inc.
--------------------------------------
(Name of Corporation)
By:
-----------------------------------
Title:
--------------------------------
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<PAGE> 177
EXHIBIT A
ARTICLES OF AMENDMENT
OF
ZYNAXIS, INC.
The Amended and Restated Articles of Incorporation of Zynaxis, Inc., as
amended, are amended to add a new Article 8 to read as follows:
"8. Subchapter E of Chapter 25 of the Business Corporation Law of
1988, as amended, as codified at 15 Pa.C.S. sections 2541-2548, shall not
be applicable to the corporation."
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<PAGE> 178
APPENDIX D
PENNSYLVANIA BUSINESS CORPORATION LAW
SUBCHAPTER D: DISSENTERS RIGHTS
SEC. 1571. APPLICATION AND EFFECT OF SUBCHAPTER.
(a) General rule. Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a
security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of
election).
Section 2907(a) (relating to proceedings to terminate breach of
qualifying conditions).
Section 7104(b)(3) (relating to procedure).
(b) Exceptions.
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting at
which a plan specified in any of section 1930, 1931(d), 1932(c) or 1952(d) is to
be voted on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the fair value of any such shares
under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the case
of:
(i) Shares converted by a plan if the shares are not converted solely
into shares of the acquiring, surviving, new or other corporation or solely
into such shares and money in lieu of fractional shares.
(ii) Shares of any preferred or special class unless the articles, the
plan or the terms of the transaction entitle all shareholders of the class
to vote thereon and require for the adoption of the plan or the
effectuation of the transaction the affirmative vote of a majority of the
votes cast by all shareholders of the class.
(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase, lease,
exchange or other disposition all or substantially all of the shares, property
or assets of another corporation by the issuance of shares, obligations or
otherwise, with or without assuming the liabilities of the other corporation and
with or without the intervention of another corporation or other person, shall
not be entitled to the rights and remedies of
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<PAGE> 179
dissenting shareholders provided in this subchapter regardless of the fact, if
it be the case, that the acquisition was accomplished by the issuance of voting
shares of the corporation to be outstanding immediately after the acquisition
sufficient to elect a majority or more of the directors of the corporation.
(c) Grant of optional dissenters rights. The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall have
dissenters rights in connection with any corporate action or other transaction
that would otherwise not entitle such shareholders to dissenters rights.
(d) Notice of dissenters rights. Unless otherwise provided by statute, if
a proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) A statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with the terms of this subchapter; and
(2) A copy of this subchapter.
(e) Other statutes. The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) Certain provisions of articles ineffective. This subchapter may not be
relaxed by any provision of the articles.
(g) Cross references. See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
SEC. 1572. DEFINITIONS.
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:
"Corporation." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
of the resulting corporations is the successor corporation for the purposes of
this subchapter. The successor corporation in a division shall have the sole
responsibility for payments to dissenters and other liabilities under this
subchapter except as otherwise provided in the plan of division.
"Dissenter." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.
"Fair value." The fair value of shares immediately before the effectuation
of the corporate action to which the dissenter objects taking into account all
relevant factors, but excluding any appreciation or depreciation in anticipation
of the corporate action.
"Interest." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors including the average
rate currently paid by the corporation on its principal bank loans.
SEC. 1573. RECORD AND BENEFICIAL HOLDERS AND OWNERS.
(a) Record holders of shares. A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented and
his other shares were registered in the names of different shareholders.
(b) Beneficial owners of shares. A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a
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dissenting shareholder under the terms of this subchapter if he submits to the
corporation not later than the time of the assertion of dissenters rights a
written consent of the record holder. A beneficial owner may not dissent with
respect to some but less than all shares of the same class or series owned by
the owner, whether or not the shares so owned by him are registered in his name.
SEC. 1574. NOTICE OF INTENTION TO DISSENT.
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed corporate
action shall constitute the written notice required by this section.
SEC. 1575. NOTICE TO DEMAND PAYMENT.
(a) General rule. If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate action is
to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporate action. In
either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment. The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
SEC. 1576. FAILURE TO COMPLY WITH NOTICE TO DEMAND PAYMENT, ETC.
(a) Effect of failure of shareholder to act. A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.
(b) Restriction on uncertificated shares. If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms of
section 1577(a) (relating to failure to effectuate corporate action).
(c) Rights retained by shareholder. The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
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SEC. 1577. RELEASE OF RESTRICTIONS OR PAYMENT FOR SHARES.
(a) Failure to effectuate corporate action. Within 60 days after the date
set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(b) Renewal of notice to demand payment. When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming to
the requirements of section 1575 (relating to notice to demand payment), with
like effect.
(c) Payment of fair value of shares. Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair market value
of the shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(d) Failure to make payment. If the corporation does not remit the amount
of its estimate of the fair value of the shares as provided by subsection (c),
it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenter had after
making demand for payment of their fair value.
SEC. 1578. ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES.
(a) General rule. If the business corporation gives notice of its estimate
of the fair value of the shares, without remitting such amount, or remits
payment of its estimate of the fair value of a dissenter's shares as permitted
by section 1577(c) (relating to payment of fair value of shares) and the
dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(b) Effect of failure to file estimate. Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the corporation.
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SEC. 1579. VALUATION PROCEEDINGS GENERALLY.
(a) General rule. Within 60 days after the latest of:
(1) Effectuation of the proposed corporate action;
(2) Timely receipt of any demand for payment under section 1575
(relating to notice to demand payment); or
(3) Timely receipt of any estimates pursuant to section 1578 (relating
to estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the shares
be determined by the court.
(b) Mandatory joinder of dissenters. All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
(c) Jurisdiction of the court. The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of recovery. Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application. If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not previously
remitted.
SEC. 1580. COSTS AND EXPENSES OF VALUATION PROCEEDINGS.
(a) General rule. The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578 (relating
to estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) Assessment of counsel fees and expert fees where lack of good faith
appears. Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply substantially
with the requirements of this subchapter and may be assessed against either the
corporation or a dissenter, in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed acted in bad faith or
in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights
provided by this subchapter.
(c) Award of fees for benefits to other dissenters. If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
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APPENDIX E
PENNSYLVANIA BUSINESS CORPORATION LAW
SUBCHAPTER E. CONTROL TRANSACTIONS
2541 APPLICATION AND EFFECT OF SUBCHAPTER. -- (a) General rule. -- Except
as otherwise provided in this section, this subchapter shall apply to a
registered corporation unless:
(1) the registered corporation is one described in section 2502(i)(ii) or
(2) (relating to registered corporation status):
(2) the bylaws, by amendment adopted either:
(i) by March 23, 1984; or
(ii) on or after March 23, 1988, and on or before June 21, 1988;
and, in either event, not subsequently rescinded by an article amendment,
explicitly provide that this subchapter shall not be applicable to the
corporation in the case of a corporation which on June 21, 1988, did not have
outstanding one or more classes or series of preference shares entitled, upon
the occurrence of a default in the payment of dividends or another similar
contingency, to elect a majority of the members of the board of directors (a
bylaw adopted on or before June 21, 1988, by a corporation excluded from the
scope of this paragraph by the restriction of this paragraph relating to certain
outstanding preference shares shall be ineffective unless ratified under
paragraph (3));
(3) the bylaws of which explicitly provide that this subchapter shall not
be applicable to the corporation by amendment ratified by the board of directors
on or after December 19, 1990, and on or before March 19, 1991, in the case of a
corporation:
(i) which on June 21, 1988, had outstanding one or more classes or series
of preference shares entitled, upon the occurrence of a default in the payment
of dividends or another similar contingency, to elect a majority of the members
of the board of directors; and
(ii) the bylaws of which on that date contained a provision described in
paragraph (2); or
(4) the articles explicitly provide that this subchapter shall not be
applicable to the corporation by a provision included in the original articles,
by an article amendment adopted prior to the date of the control transaction and
prior to or on March 23, 1988, pursuant to the procedures then applicable to the
corporation, or by an article amendment adopted prior to the date of the control
transaction and subsequent to March 23, 1988, pursuant to both:
(i) the procedures then applicable to the corporation; and
(ii) unless such proposed amendment has been approved by the board of
directors of the corporation, in which event this subparagraph shall not be
applicable, the affirmative vote of the shareholders entitled to cast at least
80% of the votes which all shareholders are entitled to cast thereon.
A reference in the articles or bylaws to former section 910 (relating to
right of shareholders to receive payment for shares following a control
transaction) of the act of May 5, 1933 (P.L. 364, No. 106), known as the
Business Corporation Law of 1933, shall be a reference to this subchapter for
the purposes of this section. See section 101(c) (relating to references to
prior statutes).
(b) Inadvertent transactions. -- This subchapter shall not apply to any
person or group that inadvertently becomes a controlling person or group if that
controlling person or group, as soon as practicable, divests itself of a
sufficient amount of its voting shares so that it is no longer a controlling
person or group.
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(c) Certain subsidiaries. -- This subchapter shall not apply to any
corporation that oil December'-?3, 1983, was a subsidiary of any other
corporation. (Last amended by Act 169, L. '92, eff. 2-16-93.)
2542 DEFINITIONS. -- The following words and phrases when used in this
subchapter shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Control transaction." The acquisition by a person or group of the status
of a controlling person or group.
"Controlling person or group." A controlling person or group as defined in
section 2543 (relating to controlling person or group).
"Fair value." A value not less than the highest price paid per share by the
controlling person or group at any time during the 90-day period ending on and
including the date of the control transaction plus an increment representing any
value, including, without limitation, any proportion of any value payable for
acquisition of control of the corporation, that may not be reflected in such
price.
"Partial payment amount." The amount per share specified in section
2545(c)(2) (relating to contents of notice).
"Subsidiary." Any corporation as to which any other corporation has or has
the right to acquire, directly or indirectly, through the exercise of all
warrants, options and rights and the conversion of all convertible securities,
whether issued or granted by the subsidiary or otherwise, voting power over
voting shares of the subsidiary that would entitle the holders thereof to cast
in excess of 50% of the votes that all shareholders would be entitled to cast in
the election of directors of such subsidiary, except that a subsidiary will not
be deemed to cease being a subsidiary as long as such corporation remains a
controlling person or group within the meaning of this subchapter.
"Voting shares." The term shall have the meaning specified in section 2552
(relating to definitions). (Last amended by Act 36, L. '89, eff. 4-27-90.)
2543 CONTROLLING PERSON OR GROUP. -- (a) General rule. -- For the purpose
of this subchapter, a "controlling person or group" means a person who has, or a
group of persons acting in concert that has, voting power over voting shares of
the registered corporation that would entitle the holders thereof to cast at
least 20% of the votes that all shareholders would be entitled to cast in an
election of directors of the corporation.
(b) Exceptions generally. -- Notwithstanding subsection (a):
(1) A person or group which would otherwise be a controlling person or
group within the meaning of this section shall not be deemed a controlling
person or group unless, subsequent to the later of March 23, 1988, or the date
this subchapter becomes applicable to a corporation by bylaw or article
amendment or otherwise, that person or group increases the percentage of
outstanding voting, shares of the corporation over which it has voting power to
in excess of the percentage of outstanding voting shares of the corporation over
which that person or group had voting power on such later date, and to at least
the amount specified in subsection (a), as the result of forming or enlarging a
group or acquiring, by purchase, voting power over voting shares of the
corporation.
(2) No person or group shall be deemed to be a controlling person or group
at any particular time if voting power over any of the following voting shares
is required to be counted at such time in order to meet the 20% minimum:
(i) Shares which have been held continuously by a natural person since
January 1, 1983, and which are held by such natural person at such time.
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Act 169, L. '92, eff. 2-16-93, deleted "-- (d) Rights cumulative. -- The rights
and remedies provided in this subchapter shall be in addition to, and not in
lieu of, any other rights or remedies provided by this subpart, the articles or
bylaws of the corporation, any, securities'. option rights or obligations of the
corporation or otherwise."
Act 36, L. '89, eff. 4-27-90, added matter in italic.
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(ii) Shares which are held at such time by any natural person or trust,
estate, foundation or other similar entity to the extent the shares were
acquired solely by gift, inheritance, bequest, devise or other testamentary
distribution or series of these transactions, directly or indirectly, from a
natural person who had acquired the shares prior to January 1, 1983.
(iii) Shares which were acquired pursuant to a stock split, stock dividend,
reclassification or similar recapitalization with respect to shares described
under this paragraph that have been held continuously since their issuance by
the corporation by the natural person or entity that acquired them from the
corporation or that were acquired, directly or indirectly, from such natural
person or entity, solely pursuant to a transaction or series of transactions
described in subparagraph (ii), and that are held at such time by a natural
person or entity described in subparagraph (ii).
(iv) Control shares as defined in section 2562 (relating to definitions)
which have not yet been accorded voting rights pursuant to section 2564(a)
(relating to voting rights of shares acquired in a control share acquisition).
(v) Shares, the voting rights of which are attributable to a person under
subsection (d) if:
(A) the person acquired the option or conversion right directly from or
made the contract, arrangement or understanding or has the relationship directly
with the corporation; and
(B) the person does not at the particular time own or otherwise
effectively-possess the voting rights of the shares.
(vi) Shares acquired directly from the corporation or an affiliate or
associate, as defined in section 2552 (relating to definitions), of the
corporation by a person engaged in business as an underwriter of securities who
acquires the shares through his participation in good faith in a firm commitment
underwriting registered under the Securities Act of 1933.
(3) In determining whether a person or group is or would be a controlling
person or group at any particular time, there shall be disregarded voting power
arising from a contingent right of the holders of one or more classes or series
of preference shares to elect one or more members of the board of directors upon
or during the continuation of a default in the payment of dividends on such
shares or another similar contingency.
(c) Certain record holders. -- A person shall not be a controlling person
under subsection (a) if the person holds voting power, in good faith and not for
the purpose of circumventing this subchapter, as an agent, bank, broker, nominee
or trustee for one or more beneficial owners who do not individually or, if they
are a group acting in concert, as a group have the voting power specified in
subsection (a), or who are not deemed a controlling person or group under
subsection (b).
(d) Existence of voting power. -- For the purposes of this subchapter, a
person has voting power over a voting share if the person has or shares,
directly or indirectly, through any option, contract, arrangement,
understanding, conversion right or relationship, or by acting jointly or in
concert or otherwise, the power to vote, or to direct the voting of, the voting
share. (Last amended by Act 198, L. '90, eff. 12-19-(O.)
2544 RIGHT OF SHAREHOLDERS TO RECEIVE PAYMENT FOR SHARES. -- Any holder of
voting shares of a registered corporation that becomes the subject of a control
transaction who shall object to the transaction shall be entitled to the rights
and remedies provided in this subchapter.
2545 NOTICE TO SHAREHOLDERS. -- (a) General rule. -- Prompt notice that a
control transaction has occurred shall be given by the controlling person or
group to:
(1) Each shareholder of record of the registered corporation holding voting
shares.
(2) To the court, accompanied by a petition to the court praying that the
fair value of the voting shares of the corporation be determined pursuant to
section 2547 (relating to valuation procedures) if the court should receive
pursuant to section 2547 certificates from shareholders of the corporation or an
equivalent request for transfer of uncertificated securities.
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Act 198, L. '90, eff. 12-19-90, added matter in italic.
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(b) Obligations of the corporation. -- If the controlling person or group
so requests, the corporation shall, at the option of the corporation and at the
expense of the person or group, either furnish a list of all such shareholders
to the person or group or mail the notice to all such shareholders.
(c) Contents of notice. -- The notice shall state that:
(1) All shareholders are entitled to demand that they be paid the fair
value of their shares.
(2) The minimum value the shareholder can receive under this subchapter is
the highest price paid per share by the controlling person or group within the
90-day period ending on and including the date of the control transaction, and
stating that value.
(3) If the shareholder believes the fair value of his shares is higher,
that this subchapter provides an appraisal procedure for determining the fair
value of such shares, specifying the name of the court and its address and the
caption of the petition referenced in subsection (a)(2), and stating that the
information is provided for the possible use by the shareholder in electing to
proceed with a court-appointed appraiser under section 2547. There shall be
included in, or enclosed with, the notice a copy of this subchapter.
(d) Optional procedure. -- The controlling person or group may, at its
option, supply with the notice referenced in subsection (c) a form for the
shareholder to demand payment of the partial payment amount directly from the
controlling person or group without utilizing the court-appointed appraiser
procedure of section 2547, requiring the shareholder to state the number and
class or series, if any, of the shares owned by him, and stating where the
payment demand must be sent and the procedures to be followed.
2546 SHAREHOLDER DEMAND FOR FAIR VALUE. -- (a) General rule. -- after the
occurrence of the control transaction, any holder of voting shares of the
registered corporation may, prior to or within a reasonable time after the
notice required by section 2545 (relating to notice to shareholders) is given,
which time period may be specified in the notice, make written demand on the
controlling person or group for payment of the amount provided in subsection (c)
with respect to the voting shares of the corporation held by the shareholder,
and the controlling person or group shall be required to pay that amount to the
shareholder pursuant to the procedures specified in section 2547 (relating to
valuation procedures).
(b) Contents of demand. -- The demand of the shareholder shall state the
number and class or series, if any, of the shares owned by him with respect to
which the demand is made.
(c) Measure of value. -- A shareholder making written demand under this
section shall be entitled to receive cash for each of his shares in an amount
equal to the fair value of each voting share as of the date on which the control
transaction occurs, taking into account all relevant factors, including an
increment representing a proportion of any value payable for acquisition of
control of the corporation.
(d) Purchases independent of subchapter. -- The provisions of this
subchapter shall not preclude a controlling person or group subject to this
subchapter from offering, whether in the notice required by section 2545 or
otherwise, to purchase voting shares of the corporation at a price other than
that provided in subsection (c), and the provisions of this subchapter shall not
preclude any shareholder from agreeing to sell his voting shares at that or any
other price to any person.
2547 VALUATION PROCEDURES. -- (a) General rule. -- If, within 45 days (or
such other time period, if any, as required by applicable law) after the date of
the notice required by section 2545 (relating to notice to shareholders), or, if
such notice was not provided prior to the date of the written demand by the
shareholder under section 2546 (relating to shareholder demand for fair value),
then within 45 days (or such other time period, if any, required by applicable
law) of the date of such written demand, the controlling person or group and the
shareholder are unable to agree on the fair value of the shares or on a binding
procedure to determine the fair value of the shares, then each shareholder who
is unable to agree on both the fair value and on such a procedure with the
controlling person or group and who so desires to obtain the rights and remedies
provided in this subchapter shall, no later than 30 days after the expiration of
the applicable 45-day or other period, surrender to the court certificates
representing any of the shares that are certificated shares, duly endorsed for
transfer to the controlling person or group, or cause any uncertificated shares
to be transferred to the court as escrow agent under subsection (c) with a
notice stating that the certificates or
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uncertificated shares are being surrendered or transferred, as the case may be,
in connection with the petition referenced in section 2545 or, if no petition
has theretofore been filed, the shareholder may file a petition within the
30-day period in the court praying that the fair value (as defined in this
subchapter) of the shares be determined.
(b) Effect of failure to give notice and surrender certificates. -- Any
shareholder who does not so give notice and surrender any certificates or cause
uncertificated shares to be transferred within such time period shall have no
further right to receive, with respect to shares the certificates of which were
not so surrendered or the uncertificated shares which were not so transferred
under this section, payment under this subchapter from the controlling person or
group with respect to the control transaction giving rise to the rights of the
shareholder under this subchapter.
(c) Escrow and notice. -- The court shall hold the certificates surrendered
and the uncertificated shares transferred to it in escrow for, and shall
promptly, following the expiration of the time period during which the
certificates may be surrendered and the uncertificated shares transferred,
provide a notice to the controlling person or group of the number of shares so
surrendered or transferred.
(d) Partial payment for shares. -- The controlling person or group shall
then make a partial payment for the shares so surrendered or transferred to the
court, within ten business days of receipt of the notice from the court, at a
per-share price equal to the partial payment amount. The court shall then make
payment as soon as practicable, but in any event within ten business days, to
the shareholders who so surrender or transfer their shares to the court of the
appropriate per-share amount received from the controlling person or group.
(e) Appointment of appraiser. -- Upon receipt of any share certificate
surrendered or uncertificated share transferred under this section, the court
shall, as soon as practicable but in any event within 30 days, appoint an
appraiser with experience in appraising share values of companies of like nature
to the registered corporation to determine the fair value of the shares.
(f) Appraisal procedure. -- The appraiser so appointed by the court shall,
as soon as reasonably practicable, determine the fair value of the shares
subject to its appraisal and the appropriate market rate of interest on the
amount then owed by the controlling person or group to the holders of the
shares. The determination of any appraiser so appointed by the court shall be
final and binding on both the controlling person or group and all shareholders
who so surrendered their share certificates or transferred their shares to the
court, except that the determination of the appraiser shall be subject to review
to the extent and within the time provided or prescribed by law in the case of
other appointed judicial officers. See 42 Pa.C.S. sec.sec.5105(a)(3) (relating
to right to appellate review) and 5571(b) (relating to appeals generally).
(g) Supplemental payment. -- Any amount owed, together with interest, as
determined pursuant to the appraisal procedures of this section shall be payable
by the controlling person or group after it is so determined and upon and
Concurrently with the delivery or transfer to the controlling person or group by
the court (which shall make delivery of the certificate or certificates
surrendered or the uncertificated shares transferred to it to the controlling
person or group as soon as practicable but in any event within ten business days
after the final determination of the amount owed) of the certificate or
certificates representing shares surrendered or the uncertified shares
transferred to the court, and the court shall then make payment, as soon as
practicable but in any event within ten business days after receipt of payment
from the controlling person or group, to the shareholders who so surrendered or
transferred their shares to the court of the appropriate per-share amount
received from the controlling person or group.
(h) Voting and dividend rights during appraisal proceedings. --
Shareholders who surrender their shares to the court pursuant to this section
shall retain the right to vote their shares and receive dividends or other
distributions thereon until the Court receives payment in full for each of the
shares so surrendered or transferred of the partial payment amount (and,
thereafter, the controlling person or group shall be entitled to vote such
shares and receive dividends or other distributions thereon). The fair value (as
determined by the appraiser) of any dividends or other distributions so received
by the shareholders shall be subtracted from any amount owing to such
shareholders under this section.
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(i) Powers of the court. -- The court may appoint such agents, including
the transfer agent of the corporation, or any other institution, to hold the
share certificates so surrendered and the shares surrendered or transferred
under this section, to effect any necessary change in record ownership of the
shares after the payment by the controlling person or group to the court of the
amount specified in subsection (h), to receive and disburse dividends or other
distributions, to provide notices to shareholders and to take such other actions
as the court determines are appropriate to effect the purposes of this
subchapter.
(j) Costs and expenses. -- The costs and expenses of any appraiser or other
agents appointed by the court shall be assessed against the controlling person
or group. The costs and expenses of any other procedure to determine fair value
shall be paid as agreed to by the parties agreeing to the procedure.
(k) Jurisdiction exclusive. -- The jurisdiction of the court under this
subchapter is plenary and exclusive and the controlling person or group and all
shareholders who so surrendered or transferred their shares to the court shall
be made a party to the proceeding as in an action against their shares.
(1) Duty of corporation. -- The corporation shall comply with requests for
information, which may be submitted pursuant to procedures maintaining the
confidentiality of the information, made by the court or the appraiser selected
by the court. If any of the shares of the corporation are not represented by
certificates, the transfer, escrow or retransfer of those shares contemplated by
this section shall be registered by the corporation, which shall give the
written notice required by section 1528(f) (relating to uncertificated shares)
to the transferring shareholder, the court and the controlling shareholder or
group, as appropriate in the circumstances.
(m) Payment under optional procedure. -- Any amount agreed upon between the
parties or determined pursuant to the procedure agreed upon between the parties
shall be payable by the controlling person or group after it is agreed upon or
determined and upon and concurrently with the delivery of any certificate or
certificates representing such shares or the transfer of any uncertificated
shares to the controlling person or group by the shareholder.
(n) Title to shares. -- Upon full payment by the controlling person or
group of the amount owed to the shareholder or to the court, as appropriate, the
shareholder shall cease to have any interest in the shares.
2548 COORDINATION WITH CONTROL TRANSACTION. -- (a) General rule. -- A
person or group that proposes to engage in a control transaction may comply with
the requirements of this subchapter in connection with the control transaction,
and the effectiveness of the rights afforded in this subchapter to shareholders
may be conditioned upon the consummation of the control transaction.
(b) Notice. -- The person or group shall give prompt written notice of the
satisfaction of any such condition to each shareholder who has made demand as
provided in this subchapter.
E-6
<PAGE> 189
APPENDIX F
NOTE EXCHANGE AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of December
6, 1996, by and among ZYNAXIS, INC., a Pennsylvania corporation (the "Company"),
CYTRX CORPORATION, a Delaware corporation ("CytRx"), VAXCEL, INC., a Delaware
corporation and a wholly owned subsidiary of CytRx ("Vaxcel"), EUCLID PARTNERS
III, L.P., a Delaware limited partnership, and S.R. ONE, LTD., a Delaware
limited partnership (together with Euclid Partners III, L.P., the
"Noteholders").
W I T N E S S E T H:
WHEREAS, the Noteholders hold certain convertible promissory notes on which
the Company is the obligor.
WHEREAS, simultaneously with the execution of this Agreement the Company is
entering into an Agreement and Plan of Merger and Contribution (the "Agreement
and Plan of Merger and Contribution") with CytRx, Vaxcel, and Vaxcel Merger Sub,
Inc., a Georgia corporation and a newly formed, wholly owned subsidiary of
Vaxcel ("Vaxcel Merger Sub"), and certain other agreements, including, among
other things, a Liquidation Agreement (the "Liquidation Agreement")
contemplating the sale of Assets (as defined therein) of the Company and
documents (the "Secured Loan Documents") relating to a secured loan being
extended to the Company by CytRx (the "Secured Loan"). The Agreement and Plan of
Merger and Contribution provides for the issuance of shares of common stock of
Vaxcel and a warrant to purchase shares of common stock of Vaxcel to CytRx in
exchange for CytRx's contribution of the Secured Loan and cash in an amount
equal to Four Million Dollars ($4,000,000) minus the balance of the Secured Loan
at the time of contribution, subject to adjustment for payments made to
shareholders of Zynaxis pursuant to Section 3.3 of the Agreement and Plan of
Merger and Contribution. The Agreement and Plan of Merger and Contribution also
provides for the issuance of shares of common stock of Vaxcel to the existing
shareholders of the Company in exchange for the contribution to Vaxcel by the
existing shareholders of the Company of all of the outstanding shares of capital
stock of the Company by means of a merger of Vaxcel Merger Sub with and into the
Company (the "Merger"). At the effective time of the Merger, the outstanding
shares of the capital stock of the Company will be converted into the right to
receive shares of the common stock of Vaxcel. As a result, shareholders of the
Company will become shareholders of Vaxcel and the Company will continue to
conduct its business and operations as a wholly owned subsidiary of Vaxcel.
WHEREAS, CytRx is unwilling to enter into the Agreement and Plan of Merger
and Contribution unless the Noteholders agree to exchange their promissory notes
for shares of common stock of Vaxcel upon the terms set forth in this Agreement
in connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants, and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Agreement to Exchange. Upon consummation of the Merger, each
convertible demand promissory note issued by the Company and held by a
Noteholder (each a "Company Demand Note") shall be exchanged for the number of
shares (the "Note Shares") of Vaxcel Common Stock equal to the Exchange Ratio
multiplied by the quotient (rounded down to the nearest whole share) obtained by
dividing the unpaid principal amount of such Company Demand Note, together with
unpaid interest thereon accrued through September 30, 1996, by the Per Share
Price, as such term is defined in the Agreement and Plan of Merger and
Contribution. At the closing of the transactions contemplated by the Agreement
and Plan of Merger and Contribution (the "Closing") each holder of a Company
Demand Note shall deliver to the Company the Company Demand Note, marked "Paid
in Full," and Vaxcel shall deliver to each such holder in exchange therefor a
certificate representing all the Note Shares to be issued in exchange therefor,
duly registered in the name of such holder, free and clear of any liens,
security interests or other defects of title.
F-1
<PAGE> 190
2. Termination of Registration Rights. Each of the undersigned Noteholders
agrees that: (i) upon execution of this Agreement all rights that the Noteholder
may have to require the Company to register securities of the Company for sale
under applicable state and federal securities laws ("Registration Rights") are
suspended pending the Closing, and (ii) upon consummation of the Merger all such
Registration Rights will be terminated and such Noteholder will have such
registration rights as are provided for such Noteholder in the Agreement and
Plan of Merger and Contribution. If the Agreement and Plan of Merger and
Contribution is terminated for any reason, beginning at the time of such
termination the undersigned Noteholder shall have such Registration Rights as
such Noteholder would have had at such time if such Registration Rights had not
been suspended pursuant to the preceding sentence.
3. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice): (i) if to the Company, CytRx
or Vaxcel, to the address set forth in Section 11.8 of the Agreement and Plan of
Merger and Contribution; and (ii) if to a Noteholder, to its address shown below
its signature on the last page hereof.
4. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
5. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement.
6. Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement, and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
7. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Pennsylvania, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
8. Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by any of the parties without the prior written
consent of the other parties. Any assignment in violation of the foregoing shall
be void.
9. Equitable Remedies. Each Noteholder agrees that irreparable damage
would occur and that CytRx, Vaxcel and the Company would not have any adequate
remedy at law in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that CytRx, Vaxcel and the Company shall be entitled to an
injunction or injunctions to prevent breaches by a Noteholder of this Agreement
and to enforce specifically the terms and provisions of this Agreement.
10. Severability. If any term, provision, covenant or restriction herein,
or the application thereof to any circumstance, shall, to any extent, be held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law.
[Remainder of page intentionally left blank.]
F-2
<PAGE> 191
[SIGNATURE PAGE TO NOTE EXCHANGE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement under
seal as of the day and year first above written.
<TABLE>
<S> <C>
ZYNAXIS, INC. CYTRX CORPORATION
By: By:
--------------------------------------- ---------------------------------------
Name: Name:
------------------------------------- -------------------------------------
Title: Title:
------------------------------------ ------------------------------------
VAXCEL, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
EUCLID PARTNERS III, L.P. S.R. ONE, LTD.
By: By:
--------------------------------------- ---------------------------------------
Name: Name:
------------------------------------- -------------------------------------
Title: Title:
------------------------------------ ------------------------------------
Address: Address:
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
</TABLE>
F-3
<PAGE> 192
APPENDIX G
PREFERRED STOCK AND WARRANT AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of December
6, 1996, by and among ZYNAXIS, INC., a Pennsylvania corporation ("Zynaxis"),
CYTRX CORPORATION, a Delaware corporation ("CytRx"), Vaxcel, Inc., a Delaware
corporation and a wholly owned subsidiary of CytRx ("Vaxcel") and the persons
listed in Exhibit A (the "Securityholders").
W I T N E S S E T H:
WHEREAS, the Securityholders collectively hold all of the outstanding
shares of Series A Convertible Preferred Stock of Zynaxis (the "Series A Stock")
and each Securityholder holds the number of shares of Series A Stock and the
number of warrants to purchase additional shares of Common Stock of Zynaxis set
forth beside such Securityholder's name in Exhibit A (the "Warrants");
WHEREAS, the Series A Stock and the Warrants were issued pursuant to that
certain Preferred Stock and Warrant Purchase Agreement dated March 29, 1995, as
amended (the "Preferred Stock and Warrant Purchase Agreement"), and in
connection with bridge loans extended by certain of the Securityholders to
Zynaxis;
WHEREAS, simultaneously with the execution of this Agreement Zynaxis is
entering into an Agreement and Plan of Merger and Contribution (the "Merger and
Contribution Agreement") with CytRx, Vaxcel, and Vaxcel Merger Sub, Inc., a
Georgia corporation and a newly formed, wholly owned subsidiary of Vaxcel
("Vaxcel Merger Sub"), and certain other agreements, including, among other
things, a Liquidation Agreement (the "Liquidation Agreement") contemplating the
sale of Assets (as defined therein) of Zynaxis and documents (the "Secured Loan
Documents") relating to a secured loan being extended to Zynaxis by CytRx (the
"Secured Loan"). The Merger and Contribution Agreement provides for the issuance
of shares of Vaxcel Common Stock and a warrant to purchase shares of Vaxcel
Common Stock to CytRx in exchange for CytRx's contribution to Vaxcel of the
Secured Loan and a cash payment in an amount equal to Four Million Dollars
($4,000,000) minus the aggregate principal and interest balance outstanding
under the Secured Loan, subject to adjustment for payments made to shareholders
of Zynaxis pursuant to Section 3.3 of the Merger and Contribution Agreement. The
Merger and Contribution Agreement also provides for the issuance of shares of
Vaxcel Common Stock to the existing shareholders of Zynaxis in exchange for the
contribution to Vaxcel by the existing shareholders of Zynaxis of all of the
outstanding shares of capital stock of Zynaxis by means of a merger of Vaxcel
Merger Sub with and into Zynaxis. At the effective time of such merger, the
outstanding shares of the capital stock of Zynaxis will be converted into the
right to receive shares of the common stock of Vaxcel (except as provided
herein). As a result, shareholders of Zynaxis will become shareholders of Vaxcel
and Zynaxis will continue to conduct its business and operations as a wholly
owned subsidiary of Vaxcel.
WHEREAS, CytRx is unwilling to enter into the Merger and Contribution
Agreement unless the rights of the Securityholders are modified as set forth in
this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants, and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Treatment of Transactions. Each of the undersigned elects that the
consummation of the transactions contemplated by the Merger and Contribution
Agreement and the other agreements contemplated by the Merger and Contribution
Agreement, including but not limited to the Liquidation Agreement, will not be
deemed a liquidation for purposes of Sections 3.1 and 3.2 of the Statement with
Respect to Shares filed by Zynaxis in the Department of State of the
Commonwealth of Pennsylvania on April 6, 1995.
G-1
<PAGE> 193
2. Consent to Secured Loan. Each of the undersigned consents to the
Secured Loan and all liens, pledges, mortgages, security interests and other
encumbrances to which the assets or properties of Zynaxis may become subject as
part of the Secured Loan.
3. Exchange of Warrants. Each of the undersigned agrees that upon
consummation of the merger between Zynaxis and Vaxcel Merger Sub pursuant to the
Merger and Contribution Agreement (the "Merger"), each Warrant held by the
undersigned shall be exchanged for a new warrant substantially in the form
attached hereto as Exhibit B to purchase a number of shares of Vaxcel Common
Stock equal to: (i) the number of shares of Common Stock of Zynaxis as the
Warrants held by such undersigned are exercisable to purchase at that time
multiplied by (ii) the Exchange Ratio (the "New Warrant"). Each of the
undersigned Securityholders agrees that such undersigned Securityholder shall
surrender the Warrants held by such undersigned Securityholder and shall receive
in exchange therefor a New Warrant. Zynaxis shall not honor any warrant
agreement representing a Warrant after the Merger.
4. Termination of Preferred Stock and Warrant Purchase Agreement and
Registration Rights. Each of the undersigned agrees that the Preferred Stock
and Warrant Purchase Agreement and all rights of the Securityholders thereunder
shall terminate upon the Merger. Each of the undersigned further agrees that:
(i) upon execution of this Agreement all rights that the undersigned
Securityholder may have to require Zynaxis to register securities of Zynaxis for
sale under applicable state and federal securities laws, whether granted
pursuant to the Preferred Stock and Warrant Agreement or otherwise
("Registration Rights"), are suspended pending the Merger, and (ii) upon
occurrence of the Merger all such Registration Rights will be terminated and
such Securityholder will have such Registration Rights as are provided for such
Securityholder in the Merger and Contribution Agreement. If the Merger and
Contribution Agreement is terminated for any reason, beginning at the time of
such termination the undersigned Securityholder shall have such Registration
Rights as such Securityholder would have had at such time if such Registration
Rights had not been suspended pursuant to the preceding sentence.
5. Accredited Investor Status of Securityholder. Each of the undersigned
Securityholders represents and warrants to CytRx, Vaxcel and Zynaxis that he or
it is an "accredited investor" within the meaning of Regulation D promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), and that he
or it is acquiring New Warrants for himself or itself and not for other persons.
Each Securityholder understands that the New Warrants and any Securities
purchased upon exercise of New Warrants (the "Warrant Securities") have not been
registered under the Securities Act and, therefore, cannot be resold unless such
Warrant Securities are registered under the Securities Act or unless an
exemption from such registration is available.
6. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice): (i) if to Zynaxis, CytRx or
Vaxcel, to the address set forth in Section 11.8 of the Merger and Contribution
Agreement; and (ii) if to a Securityholder, to its address shown below its
signature on the last page hereof.
7. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
8. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement.
9. Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement, and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
10. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Pennsylvania, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
G-2
<PAGE> 194
11. Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by any of the parties without the prior written
consent of the other parties. Any assignment in violation of the foregoing shall
be void.
12. Equitable Remedies. Each Securityholder agrees that irreparable damage
would occur and that CytRx and Vaxcel would not have any adequate remedy at law
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that CytRx and Vaxcel shall be entitled to an injunction or
injunctions to prevent breaches by a Securityholder of this Agreement and to
enforce specifically the terms and provisions of this Agreement.
13. Severability. If any term, provision, covenant or restriction herein,
or the application thereof to any circumstance, shall, to any extent, be held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions herein and the
application thereof to any other circumstances, shall remain in full force and
effect, shall not in any way be affected, impaired or invalidated, and shall be
enforced to the fullest extent permitted by law.
14. Defined Terms. Capitalized terms used in this Agreement but not
defined herein shall have the meanings given such terms in the Merger and
Contribution Agreement.
[Remainder of page intentionally left blank.]
G-3
<PAGE> 195
[FIRST OF THREE SIGNATURE PAGES TO PREFERRED STOCK AND WARRANT AGREEMENT DATED
NOVEMBER , 1996]
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement under
seal as of the day and year first above written.
<TABLE>
<S> <C>
ZYNAXIS, INC. CYTRX CORPORATION
By: By:
--------------------------------------- --------------------------------------
Name: Name:
------------------------------------- -------------------------------------
Title: Title:
------------------------------------ -------------------------------------
VAXCEL INC. S.R. ONE, LTD.
By: By:
-------------------------------------- --------------------------------------
Name: Name:
------------------------------------- -------------------------------------
Title: Title:
------------------------------------- ------------------------------------
Address:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
EUCLID PARTNERS III, L.P. ALPHI FUND L.P.
By: Alphi Investment Management Company,
By: General Partner
---------------------------------------
Name: Name:
------------------------------------- -------------------------------------
Title: Title:
----------------------------------- ------------------------------------
Address: By:
----------------------------------- -------------------------------------
Name:
----------------------------------- -------------------------------------
Title:
----------------------------------- -----------------------------------
Address:
----------------------------------- ----------------------------------
----------------------------------
----------------------------------
JAVELIN CAPITAL FUND, L.P.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-----------------------------------
Address:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
</TABLE>
G-4
<PAGE> 196
[SECOND OF THREE SIGNATURE PAGES TO PREFERRED STOCK AND WARRANT AGREEMENT DATED
NOVEMBER , 1996]
<TABLE>
<S> <C>
SENMED MEDICAL VENTURES CIP CAPITAL L.P.
By: CIP Capital Management Inc., General
Partner
By: By:
--------------------------------------- ---------------------------------------
Name: Name:
-------------------------------------- -------------------------------------
Title: Title:
------------------------------------ -------------------------------------
Address: Address:
----------------------------------- ----------------------------------
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
------------------------------------ -----------------------------------
THE WEST COMPANY WILLIAM M. SPENCER, III
By: By:
--------------------------------------- ---------------------------------------
Name: Name:
-------------------------------------- -------------------------------------
Title: Title:
------------------------------------- -------------------------------------
Address: Address:
---------------------------------- ----------------------------------
---------------------------------- ----------------------------------
---------------------------------- ----------------------------------
----------------------------------- ----------------------------------
BIOTECHNOLOGY VENTURE
FUND S.A. COMMONWEALTH VENTURE PARTNERS I, L.P.
By: By:
--------------------------------------- ---------------------------------------
Name: Name:
-------------------------------------- -------------------------------------
Title: Title:
------------------------------------ ------------------------------------
Address: Address:
----------------------------------- ----------------------------------
----------------------------------- ----------------------------------
----------------------------------- ----------------------------------
----------------------------------- ----------------------------------
</TABLE>
G-5
<PAGE> 197
[THIRD OF THREE SIGNATURE PAGES TO PREFERRED STOCK AND WARRANT AGREEMENT DATED
NOVEMBER , 1996]
<TABLE>
<S> <C>
PLEXUS VENTURES, INC. PHILADELPHIA VENTURES -- JAPAN I, L.P.
By: By:
------------------------------------------ -------------------------------------------
Name: Name:
---------------------------------------- -----------------------------------------
Title: Title:
---------------------------------------- -----------------------------------------
Address: Address:
-------------------------------------- ---------------------------------------
-------------------------------------- ---------------------------------------
-------------------------------------- ---------------------------------------
-------------------------------------- ---------------------------------------
GROTECH PARTNERS II, L.P. GROTECH PARTNERS III, L.P.
GROTECH III COMPANION FUND, L.P.
By: Mid Atlantic Ventures II, L.P., GROTECH III PENNSYLVANIA FUND, L.P.
General Partner
By: Grotech Capital Group, Inc., By: Grotech Capital Group, Inc.,
General Partner General Partner
By: By:
------------------------------------------- -------------------------------------------
Name: Name:
------------------------------------------ ------------------------------------------
Title: Title:
----------------------------------------- ------------------------------------------
Address: Address:
--------------------------------------- ---------------------------------------
--------------------------------------- ---------------------------------------
--------------------------------------- ---------------------------------------
--------------------------------------- ---------------------------------------
Dr. Gus G. Casten
Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
</TABLE>
G-6
<PAGE> 198
EXHIBIT A
HOLDERS OF PREFERRED STOCK AND WARRANTS ISSUED BY ZYNAXIS, INC.
<TABLE>
<CAPTION>
SERIES A
NAME SHARES WARRANTS
- ----------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Euclid Partners III, L.P. ............................................. 260,000 680,775
S.R. One, Ltd.......................................................... 257,500 540,000
Javelin Capital Fund, L.P. ............................................ 250,000 500,000
Alphi Fund L.P. ....................................................... 150,000 300,000
Senmed Medical Ventures................................................ 135,000 270,000
The West Company....................................................... 125,000 250,000
William M. Spencer, III................................................ 55,000 110,000
Biotechnology Venture Fund S.A. ....................................... 50,000 100,000
CIP Capital L.P. ...................................................... 45,000 265,000
Grotech Partners III, L.P. ............................................ 26,490 52,980
Plexus Ventures, Inc. ................................................. 25,000 150,000
Dr. Gus G. Casten...................................................... 12,500 25,000
Commonwealth Venture Partners I, L.P. ................................. 10,000 20,000
Grotech Partners II, L.P. ............................................. 3,455 6,910
Grotech III Companion Fund, L.P. ...................................... 3,155 6,310
Philadelphia Ventures -- Japan I, L.P. ................................ 2,500 5,000
Grotech III Pennsylvania Fund, L.P. ................................... 1,900 3,800
Totals....................................................... 1,412,500 3,285,775
</TABLE>
G-7
<PAGE> 199
EXHIBIT B
[SEE APPENDIX H]
G-8
<PAGE> 200
APPENDIX H
THE WARRANTS REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE WARRANTS MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
THE WARRANTS REPRESENTED HEREBY AND THE RIGHTS OF HOLDERS THEREOF ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND OTHER RESTRICTIONS, AND THE HOLDER OF THE
WARRANTS REPRESENTED HEREBY (INCLUDING ANY HOLDERS) ARE BOUND BY THE TERMS OF A
PREFERRED STOCK AND WARRANT AGREEMENT DATED DECEMBER 6, 1996 AMONG ZYNAXIS,
INC., A PENNSYLVANIA CORPORATION, CYTRX CORPORATION, A DELAWARE CORPORATION,
VAXCEL, INC., A DELAWARE CORPORATION, AND THE HOLDERS OF SHARES OF SERIES A
CONVERTIBLE PREFERRED STOCK OF ZYNAXIS, INC. (THE "PREFERRED STOCK AND WARRANT
AGREEMENT") (COPIES OF WHICH MAY BE OBTAINED FROM THE COMPANY).
Void after 5:00 p.m. (Eastern Standard Time), on the last
day of the Warrant Term, as provided herein.
Date: ______, 1996 Warrant to
Purchase ______
Shares of Common Stock
WARRANT
TO PURCHASE COMMON STOCK OF
VAXCEL, INC.
THIS CERTIFIES THAT, FOR VALUE RECEIVED, ____________ or such person's
registered assigns (herein called "Warrant Holder"), is the holder of a warrant
(this "Warrant") to purchase, subject to the provisions of this Warrant, from
Vaxcel, Inc., a Delaware corporation (the "Company"), at any time and from time
to time during the Warrant Term, ____________ fully paid, validly issued and
nonassessable shares of Common Stock, par value $.001 per share, of the Company
("Common Stock"), at the Warrant Price. The Warrant Price and number and kind of
securities issuable hereunder are subject to adjustment as provided herein.
1. Definitions. For the purpose of this Warrant:
(a) "Additional Shares of Capital Stock" means all shares of capital stock
issued by the Company, except shares of capital stock of the Company issued and
outstanding at the time of issuance of this Warrant or expressly authorized to
be issued in the future pursuant to any contract, option, warrant or benefit or
compensation plan in existence and/or outstanding at the time of issuance of
this Warrant.
(b) "Capital Stock" means the Company's Common Stock, and any other stock
of any class, whether now or hereafter authorized, which has the right to
participate in the distribution of earnings and assets of the Company without
limit as to amount or percentage.
(c) "Merger and Contribution Agreement" means that certain Agreement and
Plan of Merger and Contribution entered into by and among CytRx Corporation, a
Delaware corporation, the Company, Vaxcel Merger Subsidiary, Inc., a Georgia
corporation, and Zynaxis, Inc., a Pennsylvania corporation.
(d) "Per Share Price" means the Per Share Price as defined in the Merger
and Contribution Agreement.
(e) "Warrants" mean the warrants to purchase Common Stock of the Company
issued by the Company pursuant to the Preferred Stock and Warrant Agreement and
any and all warrants which are issued in exchange or substitution for any
outstanding Warrant pursuant to the terms of that Warrant.
H-1
<PAGE> 201
(f) "Warrant Price" means the price per share at which shares of Common
Stock are purchasable hereunder, as such price may be adjusted from time to time
hereunder. The Warrant Price shall initially be equal to: (i) the Per Share
Price divided by (ii) the Exchange Ratio, and beginning at 5:00 p.m. Eastern
Time on the sixtieth (60th) day following the Closing Date, as such term is
defined in the Merger and Contribution Agreement, shall be equal to two (2)
times the Warrant Price in effect immediately prior to such time.
(g) "Warrant Shares" mean shares of Common Stock or other securities
purchased upon exercise of this Warrant.
(h) "Warrant Term" means a period of one year commencing on the Closing
Date and ending at 5:00 p.m. Eastern Time on the first anniversary of the
Closing Date, as such term is defined in the Merger and Contribution Agreement.
2. Exercise of Warrants. This Warrant may be exercised during the Warrant
Term in whole or in part by the surrender of the Warrant, with the purchase
agreement attached hereto as Exhibit A properly completed and executed, at the
principal office of the Company at 154 Technology Parkway, Norcross, Georgia
30092 or such other location which shall at that time be the principal office of
the Company (the "Principal Office"), and upon payment to it by certified check
or bank draft to the order of the Company for the purchase price for the shares
to be purchased upon such exercise. The persons entitled to the shares so
purchased shall be treated for all purposes as the holders of such shares as of
the close of business on the date of exercise and certificates for the shares of
stock so purchased shall be delivered to the persons so entitled within a
reasonable time, not exceeding thirty (30) days, after such exercise. Unless
this Warrant has expired, a new Warrant of like tenor and for such number of
shares as the holder of this Warrant shall direct, representing in the aggregate
the right to purchase a number of shares with respect to which this Warrant
shall not have been exercised, shall also be issued to the holder of this
Warrant within such time.
3. Exchange. This Warrant is exchangeable from the date hereof until the
expiration of the Warrant Term, upon the surrender thereof by the holder thereof
at the Principal Office, for new Warrants of like tenor registered in such
holder's name and representing in the aggregate the right to purchase the number
of shares purchasable under the Warrant being exchanged, each of such new
Warrants to represent the right to subscribe for and purchase such number of
shares as shall be designated by said holder at the time of such surrender.
4. Transfer. The transferability of this Warrant and the Warrant Shares
are subject to the restrictions on transfer set forth below:
(a) Registration Restrictions. This Warrant and any Warrant Shares that
may be issued upon exercise thereof have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to the exemption provided in Section 4(2) thereof, and
have not been registered under state securities laws by reason of their issuance
in a transaction exempt from such registration requirements. This Warrant and
such Warrant Shares may not be sold, transferred or otherwise disposed of unless
registered under the Securities Act and applicable state securities laws (the
Company being under no obligation so to register such Warrant or Warrant Shares
except as set forth in the Merger and Contribution Agreement) or exempted from
such registration. Warrant Shares issuable upon exercise of this Warrant will
bear a legend to this effect. The restrictions contained herein shall be binding
on any transferee of this Warrant and the Company may require any such
transferee to execute an instrument agreeing in writing to be so bound by these
restrictions as a condition to transfer.
(b) Notice of Transfer and Opinion of Counsel. Warrant Holder agrees that,
prior to any transfer of this Warrant, such holder will give written notice to
the Company of such holder's intention to effect such transfer and to comply in
all other respects with the provisions of this Section 4. Each such notice shall
contain (i) a statement setting forth the intention of such holder's prospective
transferee with respect to its retention or disposition of this Warrant, and
(ii) unless waived by the Company, an opinion of counsel for such holder (who
may be the inside or staff counsel employed by such holder), as to the necessity
or non-necessity for
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registration under the Securities Act and applicable state securities laws in
connection with such transfer and stating the factual and statutory bases relied
upon by counsel. The following provisions shall then apply:
(A) If in the opinion of counsel for the Company the proposed transfer of
this Warrant may be effected without registration or qualification under the
Securities Act and any applicable state securities laws, then the registered
holder of this Warrant shall be entitled to transfer this Warrant in accordance
with the intended method of disposition specified in the statement delivered by
such holder to the Company.
(B) If in the opinion of counsel for the Company the proposed transfer of
this Warrant may not be effected without registration under the Securities Act
or registration or qualification under any applicable state securities laws, the
registered holder of this Warrant shall not be entitled to transfer this Warrant
until the requisite registration or qualification is effective.
(c) Transfer. Subject to the restrictions on transfer set forth in this
Section 4 and in Section 11 hereof, this Warrant is transferable, in whole or in
part, at the Principal Office by the registered holder thereof, in person or by
duly authorized attorney, upon presentation of this Warrant, properly endorsed,
for transfer. Each holder of this Warrant, by holding it, agrees that this
Warrant, when endorsed in blank, may be deemed negotiable, and that the holder
thereof, when the Warrant shall have been so endorsed, may be treated by the
Company and all other persons dealing with the Warrant as the absolute owner
thereof for any purpose and as the person entitled to exercise the rights
represented by this Warrant, or to the transfer thereof on the books of the
Company, any notice to the contrary notwithstanding.
5. Certain Covenants of the Company. The Company covenants and agrees that
all shares which may be issued upon the exercise of this Warrant, will, upon
issuance, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof; and without
limiting the generality of the foregoing, the Company covenants and agrees that
it will from time to time take all such action as may be required to assure that
the par value per share of the Common Stock is at all times equal to or less
than the then effective purchase price per share of the Common Stock issuable
pursuant to this Warrant. The Company further covenants and agrees that during
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized, and reserved for the purpose of
issue upon exercise of the purchase rights evidenced by this Warrant, a
sufficient number of shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant.
6. Adjustments of Warrant Price. In the event that the Company at any time
or from time to time after the issuance of the Warrants shall declare any
dividend on the Common Stock payable in Common Stock or in any right to acquire
Common Stock for any consideration less than the Warrant Price, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock split, reclassification or otherwise than by
payment of a dividend in Common Stock or in any right to acquire Common Stock),
or in the event the outstanding shares of Common Stock shall be combined or
consolidated, by reverse stock split, reclassification or otherwise, into a
lesser number of shares of Common Stock, then the Warrant Price shall,
concurrently with the effectiveness of such event, be proportionately decreased
or increased, as appropriate, to avoid dilution of the exercise rights
hereunder. In the event that the Company shall declare or pay any dividend on
the Common Stock payable in any right to acquire Common Stock for no
consideration, then the Company shall be deemed to have made a dividend payable
in Common Stock in an amount of shares equal to the maximum number of shares
issuable upon exercise of such rights to acquire Common Stock. The Warrant Price
will be adjusted on a weighted-average basis in the event of the sale of
Additional Shares of Capital Stock for consideration less than the Warrant Price
(except in connection with corporate partnership or research and development
agreements). For the purposes of this Section 6, the value of consideration
other than cash received for the issuance of Additional Shares of Capital Stock
shall be computed at the fair value thereof at the time of such issuance, as
determined in good faith by the Board of Directors of the Company.
7. Adjustments for Reclassification and Reorganization. In case of any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant (other than a change in par value, or from par value to no par
value, or from no par value to par value or as a result of a subdivision or
combination) or in case of any consolidation or merger of the Company with or
into another corporation or in case of any sale or
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transfer to another corporation of the property of the Company as an entirety or
substantially as an entirety, the Company, or such successor or purchasing
corporation, as the case may be, shall, without payment of any additional
consideration therefor, execute or require the execution of new warrants
providing that the holders of the Warrants shall have the right to exercise such
new warrants (upon terms not less favorable to the holders than those then
applicable to the Warrants) and to receive upon such exercise, in lieu of each
share of Common Stock theretofore issuable upon exercise of the Warrants, the
kind and amount of shares of stock, other securities, money or property
receivable upon such reclassification, change, consolidation, merger, sale or
transfer by the holder of one share of Common Stock issuable upon exercise of
the Warrants had the Warrants been exercised immediately prior to such
reclassification, change, consolidation, merger, sale or transfer. Such new
warrants shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in Section 6 hereof and this
Section 7. The provisions of this Section 7 shall similarly apply to successive
reclassifications, changes, consolidations, mergers, sales and transfers.
8. Notices. Whenever the Warrant Price shall be adjusted pursuant to
Section 6 hereof, or there shall be a reclassification, reorganization or other
event specified in Section 7 hereof, the Company shall promptly prepare a
certificate signed by its President or a Vice President and by its Treasurer or
Assistant Treasurer or its Secretary or Assistant Secretary, setting forth in
reasonable detail, as the case may be, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
the Warrant Price after giving effect to such adjustment, and information
regarding the execution of new warrants, and shall promptly cause copies of such
certificate to be mailed (by first class mail and postage prepaid) to the
registered holders of the Warrants.
In the event the Company shall take any action which pursuant to Section 6
may result in an adjustment of the Warrant Price, or pursuant to Section 7 may
result in the execution of new warrants, the Company will give to the registered
holders of the Warrants at their last addresses known to the Company written
notice of such action ten (10) days in advance of its effective date in order to
afford to such holders of the Warrants an opportunity to exercise the Warrants
and to purchase shares of Common Stock of the Company prior to such action
becoming effective.
9. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any purchase hereunder.
10. Loss, Theft, Destruction or Mutilation. Upon receipt by the Company of
reasonable evidence satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and (in the case of loss, theft or
destruction) of reasonable indemnity and (in case of mutilation) upon surrender
and cancellation thereof, the Company will execute and deliver, in lieu thereof
a new Warrant of like tenor.
11. Restrictions on Transfer. This Warrant is, and any Warrant Shares
issued upon the exercise of this Warrant will be, issued subject to the
restrictions on transfer contained in this Warrant or any certificate for
Warrant Shares issued in exchange or substitution for this Warrant or any
outstanding certificate for Warrant Shares and shall bear the restrictive
legend(s), if any, on this Warrant or such outstanding certificate for Warrant
Shares unless, in the opinion of counsel for the Company, such legend(s) may be
removed therefrom.
12. Headings. The description headings of the several sections of this
Warrant are inserted for convenience only and do not constitute a part of this
Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer under its corporate seal, attested by its duly
authorized officer, on the date of this Warrant.
VAXCEL, INC.
By:
-----------------------------------
As its:
ATTEST:
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EXHIBIT A
PURCHASE AGREEMENT
Date: ____________
TO:
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby agrees to purchase shares of Common Stock covered by such
Warrant, and makes payment herewith in full therefor at the price per share
provided by this Warrant.
Signature:
----------------------------
Address:
------------------------------
* * *
ASSIGNMENT
For Value Received, ____________ hereby sells, assigns and transfers all of
the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered by such Warrant to:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
, and appoints ____________ Attorney to make such transfer of the books of
Vaxcel, Inc. maintained for such purpose, with full power of substitution in the
premises.
Dated:
Signature:
------------------------
Witness:
--------------------------
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APPENDIX I
VAXCEL, INC.
SHARE WARRANT
NEITHER THIS WARRANT
NOR THE SHARES ISSUABLE UPON THE EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
, 1997 Warrant to Purchase
Shares of Common Stock
WARRANT
For the Purchase of Shares of the Common Stock,
$0.001 Par Value, of Vaxcel, Inc.,
a Delaware Corporation
This is to certify that, for good and valuable consideration received,
CytRx Corporation, a Delaware corporation ("Investor"), or registered assigns,
is entitled to purchase from Vaxcel, Inc., a Delaware corporation (the
"Company"), a number of shares of common stock of the Company ("Common Stock")
equal to: (i) the amount that the Board of Directors of Investor reasonably
determines is the minimum amount that must be contributed to the capital of the
Company in order for the Company to satisfy or continue to satisfy quantitative
requirements for inclusion or continued inclusion of the Common Stock in the
Nasdaq Small Cap Market divided by (ii) one-half of the Per Share Price and
multiplied by (iii) the Exchange Ratio. This Warrant is subject to the terms and
conditions hereinafter set forth, including, without limitation, the terms
governing exercise of this Warrant set forth in Section 1 below. Unless
otherwise defined herein, capitalized terms that are not defined herein and that
are defined terms in the Agreement and Plan of Merger and Contribution dated
December 6, 1996 among Investor, the Company, Vaxcel Merger Subsidiary, Inc. and
Zynaxis, Inc. (the "Merger and Contribution Agreement") shall have the meanings
given such terms in the Merger and Contribution Agreement.
1. Exercise of Warrant.
1.1 EXERCISE PERIOD.
Investor shall have the right to purchase shares of Common Stock under the
terms of this Warrant from the time that the Board of Directors of Investor
reasonably determines that the Company's total assets and capital and surplus
are insufficient to satisfy the total assets and capital and surplus
requirements for inclusion of the Common Stock in the Nasdaq Small Cap Market
until 5:00 p.m. Eastern time on the date that is one year after the date of this
Warrant.
1.2 EXERCISE PRICE.
The per share price for the shares which may be purchased upon the exercise
of this Warrant (the "Exercise Price") shall be initially equal to: (i) one-half
of the Per Share Price, divided by (ii) the Exchange Ratio, subject to
adjustment from time to time as provided in Section 1.3 hereof.
1.3 ADJUSTMENT.
(a) Upon each adjustment of the Exercise Price, the holder of this Warrant
shall thereafter be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of shares obtained by multiplying the Exercise Price
in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the exercise price resulting from such adjustment, and
rounding down to the nearest whole share.
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(b) If the number of outstanding shares of Common Stock is increased by a
stock split, stock dividend, or other similar event, the exercise price in
effect immediately prior to such event shall be proportionately reduced, and
conversely, if the number of outstanding shares of Common Stock is decreased by
a combination or reclassification of shares, or other similar event, the
exercise price in effect immediately prior to such event shall be
proportionately increased.
(c) If the Company shall effect a reorganization, shall merge with or
consolidate into another corporation, or shall sell, transfer or otherwise
dispose of all or substantially all of its property, assets or business and,
pursuant to the terms of such reorganization, merger, consolidation or
disposition of assets, property or assets of the Company, successor or
transferee or an affiliate thereof or cash are to be received by or distributed
to the holders of Common Stock, then the holder of this Warrant shall have the
right thereafter to receive, upon the exercise of this Warrant, the number of
shares of stock or other securities, property or assets of the Company,
successor, transferee or affiliate thereof or cash receivable upon or as a
result of such reorganization, merger, consolidation or disposition of assets by
a holder of the number of shares of Common Stock equal to that to which the
holder of this Warrant upon the exercise thereof immediately prior to such event
would be entitled. The provisions of this paragraph shall similarly apply to
successive reorganizations, mergers, consolidations or dispositions of assets.
Upon any reorganization, consolidation, merger or transfer hereinabove referred
to, this Warrant shall continue in full force and effect and the terms hereof
shall be applicable to the shares of stock and other securities, property,
assets and cash receivable upon the exercise of this Warrant after the
consummation of such reorganization, consolidation, merger or transfer, as the
case may be. The Company shall not effect any such reorganization,
consolidation, merger or transfer, unless prior to the consummation thereof the
successor corporation (if other than the Company) resulting therefrom or the
corporation purchasing such assets shall, by written instrument executed and
mailed to the registered holder hereof at the last address of such holder
appearing on the books of the Company, (i) assume the obligation to deliver to
such holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to purchase, and (ii)
agree to be bound by all the terms of this Warrant.
1.4 METHOD OF EXERCISE.
In order to exercise this Warrant, the registered owner hereof shall
present this Warrant to the Company at the office of the Company, accompanied by
written notice to the Company that the owner elects to exercise this Warrant, in
form attached hereto as Schedule A. Such notice shall also state the name or
names (with address) in which the certificate or certificates for shares which
shall be issuable on such exercise shall be issued. As soon as practicable after
the receipt of such notice, the presentation of this Warrant, and the receipt by
the Company of the full Exercise Price for such shares in current U.S. funds,
the Company shall issue and deliver to the owner a certificate or certificates
for the number of full shares which the owner seeks the Company to issue upon
that exercise of this Warrant.
Such exercise shall be deemed to have been effected immediately prior to
the close of business on the date on which such notice shall have been received
by the Company and this Warrant shall have been presented as aforesaid, and
exercise shall be at the Exercise Price in effect at such time, and at such time
the rights of the owner of this Warrant as such owner shall cease with respect
to that number of shares, and the person or persons in whose name or names any
certificate or certificates for shares, shall be issuable upon such exercise
shall be deemed to have become the owner(s) of record of the shares represented
thereby.
1.5 NOTICE OF CERTAIN ACTIONS.
In case at any time:
(1) the Company shall declare any discretionary dividend upon any class of
its capital stock payable in securities or make any special dividend or other
distribution;
(2) the Company shall offer for subscription pro rata to the holders of any
class of its capital stock any additional securities of any class or other
rights;
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(3) there shall be any capital reorganization, or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with, or
sale of all of substantially all its assets or stock to, another corporation;
(4) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Company; or
(5) the Company shall enter into an agreement or adopt a plan for the
purpose of effecting a consolidation, merger, or sale of all or substantially
all of its assets or stock, other than a merger where the Company is the
surviving corporation and the terms of the Company's capital stock remain
unchanged;
then, in any one or more of said cases, the Company shall give written notice,
by first class mail, postage prepaid, to the registered owner of this Warrant,
of the date on which (a) the books of the Company shall close or a record shall
be taken for such dividend, distribution or subscription rights, or (b) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up shall take place, as the case may be. Such notice
shall also specify the date as of which the owners of any class of capital stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their capital stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up as the case
may be. Such written notice shall be given at least 30 days prior to the action
in question if practicable and not less than 30 days prior to the record date or
the date on which the Company's transfer books are closed in respect thereto if
practicable.
1.6 RESERVATION OF SHARES.
The Company will at all times reserve and keep available out of its
authorized shares of capital stock, solely for the purpose of issuance upon the
exercise of this Warrant as herein provided, such number of Common Shares as
shall then be issuable upon the exercise of this Warrant. The Company covenants
that all shares which shall be so issuable shall, upon the exercise of this
Warrant as herein provided, be duly and validly issued and fully paid and
nonassessable by the Company.
1.7 TAXES.
The issuance of certificates for shares upon exercise of this Warrant shall
be made without charge to the owner of this Warrant for any issuance tax in
respect thereto, provided that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the registered owner of
this Warrant.
1.8 PARTIAL EXERCISE.
The purchase rights represented by this Warrant are exercisable at the
option of the registered owner hereof in whole at any time, or in part from time
to time, within the period above specified, provided, however, that such
purchase rights shall not be exercisable with respect to a fraction of a share.
In case of the purchase of less than all the shares purchasable under this
Warrant, the Company shall cancel this Warrant upon the surrender hereof and
shall execute and deliver a new Warrant of like tenor and date for the balance
of the shares purchasable hereunder.
2. Shareholder Rights. This Warrant shall not entitle the owner hereof to
any voting rights or other rights as a shareholder of the Company, or to any
other rights whatsoever except the rights herein expressly set forth, and no
dividends shall be payable or accrue in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until or unless, and
except to the extent that, this Warrant shall be exercised. No provision hereof,
in the absence of affirmative action by the owner hereof to exercise this
Warrant, and no mere enumeration herein of the rights or privileges of the owner
hereof, shall give rise to any liability of such owner for the exercise price or
as a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
3. Exchange of Warrant. This Warrant is exchangeable upon the surrender
hereof by the registered owner to the Company for a reasonable number of new
Warrants issued to the registered owner of like tenor and date representing in
the aggregate the right to purchase the number of shares purchasable hereunder,
each
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of such new Warrants to represent the right to purchase such number of shares as
shall be designated by the registered owner at the time of such surrender.
4. Transfer. This Warrant and the shares which may be purchased by the
exercise of this Warrant have not been registered under the Securities Act of
1933, as amended, or any applicable state securities laws. By accepting this
Warrant, the owner or any successor or assignee of the owner who may hereafter
become the owner of this Warrant, hereby agrees to be bound by the provisions of
such statutes. Except as otherwise provided above, this Warrant and all rights
hereunder are transferable by the registered owner hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant,
properly endorsed, to the Company.
5. Investment Representation and Legend. The owner of this Warrant, by
acceptance of this Warrant, represents and warrants to the Company that it is
acquiring this Warrant and the shares (or other securities) issuable upon the
exercise hereof for investment purposes only and not with a view towards the
resale or other distribution thereof and agrees that the Company may affix upon
this Warrant the following legend:
"Neither this Warrant nor the shares issuable upon exercise of this
Warrant have been registered under the Securities Act of 1933, as
amended."
The owner of this Warrant, by acceptance of this Warrant, further agrees that
the Company may affix the following legend (in addition to any other legend(s),
if any, required by applicable state securities laws) to certificates for shares
(or other securities) issued upon exercise of this Warrant ("Warrant Shares"):
"The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of
1933, as amended. None of such shares may be offered, sold or
transferred in the absence of such registration or an exemption
therefrom."
6. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost,
stolen, mutilated or destroyed, the Company may, on such terms as to
indemnification or otherwise as it may in its discretion reasonably impose
(which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new Warrant of like denomination and tenor as the Warrant so
lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute a
contractual obligation of the Company, whether or not the allegedly lost,
stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.
7. Presentment. Prior to due presentment for registration of transfer of
this Warrant, the Company may deem and treat the registered owner hereof as the
absolute owner of this Warrant, notwithstanding any notation of ownership or
other writing thereon, for the purpose of any exercise thereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
8. Notice. Notice or demand pursuant to this Warrant shall be sufficiently
given or made, if sent by first-class mail, postage prepaid, addressed, if to
the owner of this Warrant, to such owner at its last known address as it shall
appear in the records of the Company, and if to the Company, at Vaxcel, Inc.,
154 Technology Parkway, Norcross, Georgia 30092, Attention: President. The
Company may alter the address to which communications are to be sent by giving
notice of such change of address in conformity with the provision of this
Section 8 for the giving of notice.
9. Governing Law. The validity, interpretation and performance of this
Warrant shall be governed by the laws of the State of Delaware.
10. Successors, Assigns. All the terms and provisions of this Warrant
shall be binding upon, inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto.
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IN WITNESS WHEREOF, the Company has created this Warrant to be executed by the
signatures of its duly authorized officers and the corporate seal hereunto
affixed.
VAXCEL, INC.
By:
-----------------------------------
Paul J. Wilson, III
President and Chief Executive
Officer
[CORPORATE SEAL]
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SCHEDULE A TO WARRANT
Vaxcel, Inc.
154 Technology Parkway
Norcross, Georgia 30092
Attention: Paul J. Wilson, III
Re: Warrant dated as of , 1997, issued to CytRx Corporation (the
"Warrant")
Gentlemen:
We hereby exercise the Warrant for ______ shares of Common Stock, $0.001 par
value, at the current exercise price of $________ per share. Certificates for
such shares should be issued in the name of CytRx Corporation. Enclosed is a
check in the aggregate amount of $____________.
--------------------------------------
Holder
--------------------------------------
Dated:
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
ARTICLE VI OF THE CERTIFICATE OF INCORPORATION OF THE REGISTRANT PROVIDES:
SECTION 6.1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, and whether formal or
informal (hereinafter a "proceeding"), by reason of the fact:
(a) that he or she, or a person of whom he or she is the legal
representative, is or was a director or Board-elected officer of the
Corporation, or
(b) that he or she, being at the time a director or Board-elected
officer of the Corporation, is or was serving at the request of the
Corporation as a director, trustee, officer, employee or agent of another
corporation or of a partnership, limited liability company, joint venture,
trust or other enterprise, including service with respect to an employee
benefit plan (collectively, "another enterprise" or "other enterprise"),
whether either in case (a) or in case (b) the basis of such proceeding is
alleged action or inaction (x) in an official capacity as a director or officer
of the Corporation, or as a director, trustee, officer, employee or agent of
such other enterprise, or (y) in any other capacity related to the Corporation
or such other enterprise while so serving as a director, trustee, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent permitted by Section 145 of the Delaware General Corporation
Law (or any successor provision or provisions) as the same exists or may
hereafter be amended (but, in the case of any such amendment, with respect to
alleged action or inaction occurring prior to such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than permitted prior thereto), against all expense, liability and loss
(including without limitation attorneys' fees and expenses, judgments, fines,
ERISA excise taxes or penalties and amounts paid in settlement) actually and
reasonably incurred by such person in connection therewith. The persons
indemnified by this Article VI are hereinafter referred to as "indemnitees."
Such indemnification as to such alleged action or inaction shall continue as to
an indemnitee who has after such alleged action or inaction ceased to be a
director or officer of the Corporation, or director, trustee, officer, employee
or agent of such other enterprise; and shall inure to the benefit of the
indemnitee's heirs, executors and administrators. Notwithstanding the foregoing,
except as may be provided in the Bylaws or by the Board of Directors, the
Corporation shall not indemnify any such indemnitee in connection with a
proceeding (or portion thereof) initiated by such indemnitee (but this
prohibition shall not apply to a counterclaim, cross-claim or third-party claim
brought by the indemnitee in any proceeding) unless such proceeding (or portion
thereof) was authorized by the Board of Directors. The right to indemnification
conferred in this Article VI: (i) shall be a contract right; (ii) shall not be
affected adversely as to any indemnitee by any amendment of this Certificate of
Incorporation with respect to any alleged action or inaction occurring prior to
such amendment; and (iii) shall, subject to any requirements imposed by law and
the Bylaws, include the right to be paid by the Corporation the expenses
(including attorneys' fees) incurred in defending any such proceeding in advance
of its final disposition.
SECTION 6.2. RELATIONSHIP TO OTHER RIGHTS AND PROVISIONS CONCERNING
INDEMNIFICATION. The rights to indemnification and to the advancement of
expenses conferred in this Article VI shall not be exclusive of any other right
which any person may have or hereafter acquire under this Certificate of
Incorporation, any statute, bylaw, agreement, vote of shareholders or
disinterested directors or otherwise. The Bylaws may contain such other
provisions concerning indemnification, including provisions specifying
reasonable procedures relating to and conditions to the receipt by indemnitees
of indemnification, provided that such provisions are not inconsistent with the
provisions of this Article VI.
SECTION 6.3. OTHER OFFICERS, EMPLOYEES AND AGENTS. The Corporation may,
to the extent authorized from time to time by the Board of Directors, grant
rights to indemnification, and to the advancement of
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expenses, to any other officer, employee or agent of the Corporation (or any
person serving at the Corporation's request as a director, trustee, officer,
employee or agent of another enterprise) or to any person who is or was a
director, officer, employee or agent of any of the Corporation's affiliates,
predecessor or subsidiary corporations or of a constituent corporation absorbed
by the Corporation in a consolidation or merger or who is or was serving at the
request of such affiliate, predecessor or subsidiary corporation or of such
constituent corporation as a director, trustee, officer, employee or agent of
another enterprise, in each case as determined by the Board of Directors to the
fullest extent of the provisions of this Article VI in cases of the
indemnification and advancement of expenses of directors and Board-elected
officers of the Corporation, or to any lesser extent (or greater extent, if
permitted by law) determined by the Board of Directors. If so indemnified, such
persons shall be included in the term "indemnitee" or "indemnitees" as used in
this Article VI and in the Bylaws of the Corporation.
ARTICLE VII OF THE BYLAWS OF REGISTRANT PROVIDES:
SECTION 7.01. INDEMNIFICATION PROVISIONS IN CERTIFICATE OF
INCORPORATION. The provisions of this Article VII are intended to supplement
Article VI of the Certificate of Incorporation pursuant to Sections 6.2 and 6.3
thereof. To the extent that this Article VII contains any provisions
inconsistent with said Article VI, the provisions of the Certificate of
Incorporation shall govern. Terms defined in such Article VI shall have the same
meaning in this Article VII.
SECTION 7.02. INDEMNIFICATION OF OTHERS. The Corporation may indemnify
and advance expenses to its other officers, employees and agents to the same
extent as to its directors and Board-elected officers, as set forth in the
Certificate of Incorporation and in this Article VII of the Bylaws of the
Corporation, and, if so indemnified, such persons shall be included in the term
"indemnitee" or "indemnitees" as used in this Article VII of the Bylaws.
SECTION 7.03. UNDERTAKINGS FOR ADVANCES OF EXPENSES. If and to the extent
the Delaware General Corporation Law requires, an advancement by the Corporation
of expenses incurred by an indemnitee pursuant to clause (iii) of the last
sentence of Section 6.1 of the Certificate of Incorporation (hereinafter an
"advancement of expenses") shall be made only upon delivery to the Corporation
of an undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal (hereinafter a "final adjudication") that such indemnitee is not entitled
to be indemnified for such expenses under Article VI of the Certificate of
Incorporation or otherwise.
SECTION 7.04. CLAIMS FOR INDEMNIFICATION. If a claim for indemnification
under Section 6.1 of the Certificate of Incorporation is not paid in full by the
Corporation within 60 days after it has been received in writing by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If the indemnitee is successful in whole or in part in any such
suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses only upon
a final adjudication that, the indemnitee has not met the applicable standard of
conduct set forth in Section 145 of the Delaware General Corporation Law (or any
successor provision or provisions). Neither the failure of the Corporation
(including the Board of Directors, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
Section 145 of the Delaware General Corporation Law (or any successor provision
or provisions), nor an actual determination by the Corporation (including the
Board of Directors, independent legal counsel, or its shareholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the
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indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to have or retain such advancement of expenses,
under Article VI of the Certificate of Incorporation or this Article VII or
otherwise, shall be on the Corporation.
SECTION 7.05. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, trustee, officer, employee or agent
of the Corporation or another enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the Delaware General Corporation
Law.
SECTION 7.06. SEVERABILITY. In the event that any of the provisions of
this Article VII (including any provision within a single section, paragraph or
sentence) is held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, the remaining provisions are severable and shall remain
enforceable to the full extent permitted by law.
Section 145 of the Delaware General Corporation law empowers Vaxcel to
indemnify its officers and directors under certain circumstances. The pertinent
provisions of that statute read as follows:
"(a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
"(b) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
"(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
"(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has
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met the applicable standard of conduct set forth in subsections (a) and (b)
of this section. Such determination shall be made (1) by a majority vote of
the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written
opinion, or (3) by the shareholders.
"(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
"(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of shareholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
"(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
"(h) For purposes of this section, references to 'the corporation'
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
"(i) For purposes of this section, references to 'other enterprises'
shall include employee benefit plans; references to 'fines' shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to 'serving at the request of the corporation' shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner 'not opposed to the best interests of the
corporation' as referred to in this section.
"(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
"(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of expenses
or indemnification brought under this section or under any bylaw,
agreement, vote of shareholders or disinterested directors, or otherwise.
The Court of Chancery may summarily determine a corporation's obligation to
advance expenses (including attorneys' fees)."
As permitted by applicable statutes, the Registrant has purchased a
standard directors' and officers' liability policy that will, subject to certain
limitations, indemnify the Registrant and its officers and directors
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<PAGE> 215
for damages they become legally obligated to pay as a result of any negligent
act, error, or omission committed by directors or officers while acting in their
capacities as such.
The indemnification provisions in the Bylaws may be sufficiently broad to
permit indemnification of the Registrant's officers and directors for
liabilities arising under the Securities Act.
ITEM 21. EXHIBITS.
The following exhibits are filed herein:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------------------------------
<S> <C>
2.1 -- Agreement and Plan of Merger, dated as of December 6, 1996, by and among CytRx
Corporation, Vaxcel, Inc., Vaxcel Merger Subsidiary, Inc., and Zynaxis, Inc.
(included as Appendix A to the Proxy Statement/Prospectus included in this
Registration Statement)
3.1 -- Amended and Restated Certificate of Incorporation of Vaxcel, Inc.
3.2 -- Bylaws of Vaxcel, Inc.
4.1 -- Warrant to purchase shares of common stock of Vaxcel, Inc., to be issued to
certain shareholders of Zynaxis, Inc. (included as Appendix H in the Proxy
Statement/Prospectus included in this Registration Statement)
4.2 -- Warrant to purchase shares of the common stock of Vaxcel, Inc., to be issued to
CytRx Corporation (included as Appendix I to the Proxy Statement/Prospectus
included in this Registration Statement)
5.1 -- Form of opinion of Alston & Bird as to the legality of the shares of the common
stock of Vaxcel, Inc. being issued
8.1 -- Form of opinion of Alston & Bird regarding certain tax matters
10.1 -- Agreement of Sublease dated January 18, 1996 by and between Vaxcel, Inc. and
SeaLite Sciences, Inc.
10.2 -- Amendment to Sublease dated October 15, 1996 by and between Vaxcel, Inc. and
SeaLite Sciences, Inc.
10.3 -- Amended and Restated License Agreement (OPTIVAX(R)) dated October 10, 1996 by and
between Vaxcel, Inc. and CytRx Corporation
10.4 -- Amended and Restated Supply Agreement dated October 10, 1996 by and between
Vaxcel, Inc. and CytRx Corporation (to be filed supplementally by amendment)
10.5 -- Employment Agreement dated August 16, 1993 by and between Vaxcel, Inc. and Paul
J. Wilson
10.6 -- Amendment No. 1 to Employment Agreement dated March 6, 1994 by and between
Vaxcel, Inc. and Paul J. Wilson
10.7 -- Form of amendment No. 1 to Non-Qualified Stock Option Agreement by and between
Vaxcel, Inc. and Paul J. Wilson
10.8 -- Facilities Use Agreement dated October 16, 1996 by and between Vaxcel, Inc. and
Proceutics, Inc.
10.9 -- Feasibility Evaluation/Development Option Agreement dated August 4, 1995 by and
between Vaxcel, Inc. and Connaught Laboratories, Inc.
10.10 -- Lease Agreement dated November 23, 1993 by and between Vaxcel, Inc. and New
England Mutual Life Insurance Company
10.11 -- First Amendment to Lease Agreement dated January 23, 1996 by and between Vaxcel,
Inc. and Regency Holdings, Inc.
10.12 -- Second Amendment to Lease Agreement dated October 15, 1996 by and between Vaxcel,
Inc. and Regency Holdings, Inc.
10.13 -- License Agreement (OPTIVAX(R) Copolymer Adjuvant) dated April 9, 1996 by and
between Vaxcel, Inc. and Corixa Corporation
</TABLE>
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<PAGE> 216
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<S> <C> <C>
10.14 -- Option Agreement dated October 15, 1995 by and between Vaxcel, Inc. and Medeva
Europe Limited
10.15 -- Services and Facilities Use Agreement dated October 10, 1996 by and between
Vaxcel, Inc. and CytRx Corporation
10.16 -- Vaxcel, Inc. 1993 Stock Option Plan
13.1 -- Zynaxis' Annual Report to Shareholders for the year ended December 31, 1995
(Incorporated herein by reference to Zynaxis' Annual Report on Form 10-K/A-1 for
the fiscal year ended December 31, 1995)
23.1 -- Consent of Ernst & Young LLP, independent auditors for Vaxcel, Inc.
23.2 -- Consent of Arther Andersen LLP, independent public accountants for Zynaxis, Inc.
23.3 -- Consent of Alston & Bird (included in Exhibit 5.1 and 8.1)
24.1 -- Power of Attorney (contained on the signature page hereof)
27.1 -- Financial Data Schedule
99.1 -- Form of Proxy of Zynaxis, Inc.
</TABLE>
ITEM 22. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b)) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled
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<PAGE> 217
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
C.(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
D. The undersigned Registrant hereby undertakes to respond to requests for
information that are incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
E. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE> 218
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Norcross, State of
Georgia on this the 31st day of December, 1996.
VAXCEL, INC.
(Registrant)
By: /s/ PAUL J. WILSON III
------------------------------------
PAUL J. WILSON III
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, Jack J. Luchese
and Paul J. Wilson, and each one of them, his true and lawful attorneys-in-fact
and agents, each with full power of substitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to sign any and
all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same Merger covered by
this Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming that each of said
attorneys-in-fact and agents or any of them, or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY DATE
- ---------------------------------------- ----------------------------- -------------------
<C> <S> <C>
/s/ JACK J. LUCHESE Chairman of the Board, December 31, 1996
- ---------------------------------------- Director
JACK J. LUCHESE
/s/ PAUL J. WILSON III Director, President and Chief December 31, 1996
- ---------------------------------------- Executive Officer
PAUL J. WILSON III (Principal Executive
Officer)
/s/ JACK L. BOWMAN Director December 31, 1996
- ----------------------------------------
JACK L. BOWMAN
/s/ RAYMOND C. CARNAHAN, JR. Director December 31, 1996
- ----------------------------------------
RAYMOND C. CARNAHAN, JR.
/s/ HERBERT H. MCDADE, JR. Director December 31, 1996
- ----------------------------------------
HERBERT H. MCDADE, JR.
/s/ MARK W. REYNOLDS Chief Financial Officer December 31, 1996
- ---------------------------------------- (Principal Financial and
MARK W. REYNOLDS Principal Accounting
Officer)
</TABLE>
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<PAGE> 219
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------ ------------
<C> <C> <S> <C>
3.1 -- Certificate of Incorporation of Vaxcel, Inc. ...........................
3.2 -- Bylaws of Vaxcel, Inc. .................................................
5.1 -- Form of opinion of Alston & Bird as to the legality of the shares of the
Securities being issued.................................................
8.1 -- Form of opinion of Alston & Bird regarding certain tax matters..........
10.1 -- Agreement of Sublease dated January 18, 1996 by and between Vaxcel, Inc.
and SeaLite Sciences, Inc. .............................................
10.2 -- Amendment to Sublease dated October 15, 1996 by and between Vaxcel, Inc.
and SeaLite Sciences, Inc. .............................................
10.3 -- Amended and Restated License Agreement (OPTIVAX(R)) dated October 10,
1996 by and between Vaxcel, Inc. and CytRx Corporation..................
10.4 -- Amended and Restated Supply Agreement dated October 10, 1996 by and
between Vaxcel, Inc. and CytRx Corporation*.............................
10.5 -- Employment Agreement dated August 16, 1993 by and between Vaxcel, Inc.
and Paul J. Wilson......................................................
10.6 -- Amendment No. 1 to Employment Agreement dated March 6, 1994 by and
between Vaxcel, Inc. and Paul J. Wilson.................................
10.7 -- Form of amendment No. 1 to Non-Qualified Stock Option Agreement 1997 by
and between Vaxcel, Inc. and Paul J. Wilson.............................
10.8 -- Facilities Use Agreement dated October 16, 1996 by and between Vaxcel,
Inc. and Proceutics, Inc. ..............................................
10.9 -- Feasibility Evaluation/Development Option Agreement dated August 4, 1995
by and between Vaxcel, Inc. and Connaught Laboratories, Inc. ...........
10.10 -- Lease Agreement dated November 23, 1993 by and between Vaxcel, Inc. and
New England Mutual Life Insurance Company...............................
10.11 -- First Amendment to Lease Agreement dated January 23, 1996 by and between
Vaxcel, Inc. and Regency Holdings, Inc. ................................
10.12 -- Second Amendment to Lease Agreement dated October 15, 1996 by and
between Vaxcel, Inc. and Regency Holdings, Inc. ........................
10.13 -- License Agreement (OPTIVAX(R) Copolymer Adjuvant) dated April 9, 1996 by
and between Vaxcel, Inc. and Corixa Corporation.........................
10.14 -- Option Agreement dated October 15, 1995 by and between Vaxcel, Inc. and
Medeva Europe Limited...................................................
10.15 -- Services and Facilities Use Agreement dated October 10, 1996 by and
between Vaxcel, Inc. and CytRx Corporation..............................
10.16 -- Vaxcel, Inc. 1993 Stock Option Plan.....................................
23.1 -- Consent of Ernst & Young, LLP independent auditors of Vaxcel, Inc. .....
23.2 -- Consent of Arthur Andersen, independent public accountants for Zynaxis,
Inc. ...................................................................
23.3 -- Consent of Alston & Bird, counsel to Vaxcel, Inc. (included in Exhibit
5.1 and 8.1)............................................................
27.1 -- Financial Data Schedule.................................................
99.1 -- Form of Proxy of Zynaxis, Inc. .........................................
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
VAXCEL, INC.
1996
The original certificate of incorporation of Vaxcel, Inc. was filed
with the Secretary of State of Delaware on January 6, 1993. This Amended
Restated Certificate of Incorporation was duly adopted by the Board of
Directors on December 6, 1996 and approved by the stockholders on December 27,
1996, in accordance with Section Section 245 and 242 of the General
Corporation Law of Delaware and restates, integrates and further amends the
provisions of the corporation's certificate of incorporation as heretofore
amended and restated.
ARTICLE I
NAME
The name of the corporation is Vaxcel, Inc. (the "Corporation").
ARTICLE II
ADDRESS OF REGISTERED OFFICE;
NAME OF REGISTERED AGENT
The address of the registered office of the Corporation in the State
of Delaware is located at 32 Lockerman Square, Suite L-100, in the City of
Dover, in the County of Kent, in the State of Delaware. The name of its
registered agent at that address is Prentice-Hall Corporation System, Inc.
ARTICLE III
PURPOSE AND POWERS
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may now or hereafter be organized under the
Delaware General Corporation Law. It shall have all powers that may now or
hereafter be lawful for a corporation to exercise under the Delaware General
Corporation Law.
<PAGE> 2
ARTICLE IV
CAPITAL STOCK
SECTION 4.1. TOTAL NUMBER OF SHARES OF STOCK. The total number of
shares of stock of all classes that the Corporation shall have authority to
issue is 32,000,000 shares, consisting of the following classes:
(a) 30,000,000 shares of Common Stock, $.001 par value per share
(the "Common Stock");
(b) 2,000,000 shares of Seried Preferred Stock, $.001 par value
per share (the "Preferred Stock").
SECTION 4.2. COMMON STOCK.
(b) Dividends. After dividends on the Preferred Stock, to the
extent such Preferred Stock may be entitled thereto, shall have been paid or
set apart for payment, the Board of Directors of the Corporation may cause
dividends to be paid to holders of shares of Common Stock out of funds legally
available for the payment of dividends.
(c) Liquidation. Subject to the provisions of the Preferred
Stock, in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, all distributions on the Common Stock of the
Corporation shall be payable to the holders of shares of Common Stock share and
share alike.
(d) Registration of Transfer. The Corporation shall keep at its
principal office (or such other place as the Corporation reasonably designates)
a register for the registration of shares of the Common Stock. Upon the
surrender of any certificate representing shares of any class of Common Stock
at such place, the Corporation shall, at the request of the registered holder
of such certificate, execute and deliver a new certificate or certificates in
exchange therefor representing in the aggregate the number of shares of such
class represented by the surrendered certificate, and the Corporation forthwith
shall cancel such surrendered certificate. Each such new certificate will be
registered in such name and will represent such number of shares of such class
as is requested by the holder of the surrendered certificate and will be
substantially identical in form to the surrendered certificate. The issuance
of new certificates shall be made without charge to the holders of the
surrendered certificates for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such issuance.
(e) Replacement. Upon receipt of evidence reasonably satisfactory
to the Corporation (an affidavit of the registered holder will be satisfactory)
of the ownership and the loss, theft, destruction or mutilation of any
certificate evidencing one or more shares of any class of Common Stock, and in
the case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Corporation
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(provided that if the holder is a financial institution or other institutional
investor its own agreement will be satisfactory), or, in the case of any such
mutilation upon surrender of such certificate, the Corporation shall (at its
expense) execute and deliver in lieu of such certificate a new certificate of
like kind representing the number of shares of such class represented by such
lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
(f) Notices. All notices referred to herein shall be in writing,
shall be delivered personally or by first class mail, postage prepaid, and
shall be deemed to have been given when so delivered or mailed to the
Corporation at its principal executive offices and to any stockholder at such
holder's address as it appears in the stock records of the Corporation (unless
otherwise specified in a written notice to the Corporation by such holder).
(g) Amendments. No amendment to the provisions of this Section
4.2 may be made without the written consent of the holders of a majority of the
Common Stock.
SECTION 4.3 PREFERRED STOCK.
(a) The shares of Preferred Stock of the Corporation may be issued
from time to time in one or more classes or series thereof, the shares of each
class or series thereof to have such voting powers, full or limited, or no
voting powers, and such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as are stated and expressed herein or in the resolution
or resolutions providing for the issue of such class or series, adopted by the
Board of Directors as hereinafter provided.
(b) Authority is hereby expressly granted to the Board of Directors of
the Corporation, subject to the provisions of this Article IV and to the
limitations prescribed by the Delaware General Corporation Law, to authorize
the issue of one or more classes, or series thereof, of Preferred Stock and
with respect to each such class or series to fix by resolution or resolutions
providing for the issue of such class or series the voting powers, full or
limited, if any, of the shares of such class or series and the designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof. The authority of the
Board of Directors with respect to each class or series thereof shall include,
but not be limited to, the determination or fixing of the following:
(i) the maximum number of shares to constitute such class
or series, which may subsequently be increased or decreased by resolution of
the Board of Directors unless otherwise provided in the resolution providing
for the issue of such class or series, the distinctive designation thereof and
the stated value thereof if different than the par value thereof;
(ii) the dividend rate of such class or series, the
conditions and dates upon which such dividends shall be payable, the relation
which such dividends shall bear to
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the dividends payable on any other class or classes of stock or any other
series of any class of stock of the Corporation, and whether such dividends
shall be cumulative or noncumulative;
(iii) whether the shares of such class or series shall be
subject to redemption, in whole or in part, and, if made subject to such
redemption, the times, prices and other terms and conditions of such
redemption, including whether or not such redemption may occur at the option of
the Corporation or at the option of the holder or holders thereof or upon the
happening of a specified event;
(iv) the terms and amount of any sinking fund established
for the purchase or redemption of the shares of such class or series;
(v) whether or not the shares of such class or series
shall be convertible into or exchangeable for shares of any other class or
classes of any stock or any other series of any class of stock of the
Corporation, and, if provision is made for conversion or exchange, the times,
prices, rates, adjustments, and other terms and conditions of such conversion
or exchange;
(vi) the extent, if any, to which the holders of shares of
such class or series shall be entitled to vote with respect to the election of
directors or otherwise;
(vii) the restrictions, if any, on the issue or reissue of
any additional Preferred Stock;
(viii) the rights of the holders of the shares of such class
or series upon the dissolution of, or upon the subsequent distribution of
assets of, the Corporation; and
(ix) the manner in which any facts ascertainable outside
the resolution or resolutions providing for the issue of such class or series
shall operate upon the voting powers, designations, preferences, rights and
qualifications, limitations or restrictions of such class or series.
ARTICLE V
BOARD OF DIRECTORS
SECTION 5.1. POWERS OF THE BOARD OF DIRECTORS. The business and
affairs of the Corporation shall be managed by or under the direction of its
Board of Directors. In furtherance, and not in limitation, of the powers
conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized to:
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(a) adopt, amend, alter, change or repeal the Bylaws of the
Corporation; provided, however, that no Bylaws hereafter adopted shall
invalidate any prior act of the directors that would have been valid if such
new Bylaws had not been adopted;
(b) determine the rights, powers, duties, rules and procedures
that affect the power of the Board of Directors to manage and direct the
business and affairs of the Corporation, including the power to designate and
empower committees of the Board of Directors, to elect, appoint and empower the
officers and other agents of the Corporation, and to determine the time and
place of, and the notice requirements for, Board meetings, as well as quorum
and voting requirements for, and the manner of taking, Board action; and
(c) exercise all such powers and do all such acts as may be
exercised or done by the Corporation, subject to the provisions of the laws of
the State of Delaware, this Certificate of Incorporation, and the Bylaws of the
Corporation.
SECTION 5.2. NUMBER OF DIRECTORS. The number of directors
constituting the Board of Directors shall be as specified in the Bylaws or
fixed in the manner provided therein.
SECTION 5.3. VACANCIES. Any vacancies in the Board of Directors for
any reason and any newly created directorships resulting by reason of any
increase in the number of directors may be filled by the Board of Directors,
acting by a majority of the remaining directors then in office, although less
than a quorum, or by a sole remaining director, and any directors so appointed
shall hold office until their successors are elected and qualified or their
earlier death, resignation or removal.
SECTION 5.4. FACTORS TO BE CONSIDERED BY THE DIRECTORS. In
connection with the exercise of its or their judgment in determining what is in
the best interests of the Corporation and its stockholders, the Board of
Directors, any committee of the Board of Directors or any individual director
may, but shall not be required to, in addition to considering the long-term and
short-term interests of the stockholders, consider all of the following factors
and any other factors which it deems relevant: (i) the social and economic
effects of the matter to be considered on the Corporation and its subsidiaries,
its and their employees, customers and creditors and the communities in which
the Corporation and its subsidiaries operate or are located; and (ii) when
evaluating a business combination or a proposal by another Person or Persons to
make a business combination or a tender or exchange offer or any other proposal
relating to a potential change of control of the Corporation, (x) the business
and financial condition and earnings prospects of the acquiring Person or
Persons, including, but not limited to, debt service and other existing
financial obligations, financial obligations to be incurred in connection with
the acquisition, and other likely financial obligations of the acquiring Person
or Persons, and the possible effect of such conditions upon the Corporation and
its subsidiaries and the communities in which the Corporation and its
subsidiaries operate or are located, (y) the competence, experience and
integrity of the acquiring Person or Persons and its or their
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management, and (z) the prospects for successful conclusion of the business
combination, offer or proposal. The provisions of this Section shall be deemed
solely to grant discretionary authority to the directors and shall not be
deemed to provide to any constituency the right to be considered. As used in
this Section, the term "Person" means any individual, partnership, firm,
corporation, limited liability company, association, trust, unincorporated
organization or other entity; when two or more Persons act as a partnership,
limited partnership, syndicate, or other group acting in concert for the
purpose of acquiring, holding, voting or disposing of securities of the
Corporation, such partnership, limited partnership, syndicate or group shall
also be deemed a "Person" for purposes of this Section.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1. RIGHT TO INDEMNIFICATION. Each person who was or is
made a party or is threatened to be made a party to or is otherwise involved in
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, and whether formal or
informal (hereinafter a "proceeding"), by reason of the fact:
(a) that he or she, or a person of whom he or she is the legal
representative, is or was a director or Board-elected officer of the
Corporation, or
(b) that he or she, being at the time a director or Board-elected
officer of the Corporation, is or was serving at the request of the Corporation
as a director, trustee, officer, employee or agent of another corporation or of
a partnership, limited liability company, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(collectively, "another enterprise" or "other enterprise"),
whether either in case (a) or in case (b) the basis of such proceeding is
alleged action or inaction (x) in an official capacity as a director or officer
of the Corporation, or as a director, trustee, officer, employee or agent of
such other enterprise, or (y) in any other capacity related to the Corporation
or such other enterprise while so serving as a director, trustee, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent permitted by Section 145 of the Delaware General Corporation
Law (or any successor provision or provisions) as the same exists or may
hereafter be amended (but, in the case of any such amendment, with respect to
alleged action or inaction occurring prior to such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than permitted prior thereto), against all expense,
liability and loss (including without limitation attorneys' fees and expenses,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) actually and reasonably incurred by such person in connection
therewith. The persons indemnified by this Article VI are hereinafter referred
to as
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"indemnitees." Such indemnification as to such alleged action or inaction shall
continue as to an indemnitee who has after such alleged action or inaction
ceased to be a director or officer of the Corporation, or director, trustee,
officer, employee or agent of such other enterprise; and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
Notwithstanding the foregoing, except as may be provided in the Bylaws or by
the Board of Directors, the Corporation shall not indemnify any such indemnitee
in connection with a proceeding (or portion thereof) initiated by such
indemnitee (but this prohibition shall not apply to a counterclaim, cross-claim
or third-party claim brought by the indemnitee in any proceeding) unless such
proceeding (or portion thereof) was authorized by the Board of Directors. The
right to indemnification conferred in this Article VI: (i) shall be a contract
right; (ii) shall not be affected adversely as to any indemnitee by any
amendment of this Certificate of Incorporation with respect to any alleged
action or inaction occurring prior to such amendment; and (iii) shall, subject
to any requirements imposed by law and the Bylaws, include the right to be paid
by the Corporation the expenses (including attorneys' fees) incurred in
defending any such proceeding in advance of its final disposition.
SECTION 6.2. RELATIONSHIP TO OTHER RIGHTS AND PROVISIONS CONCERNING
INDEMNIFICATION. The rights to indemnification and to the advancement of
expenses conferred in this Article VI shall not be exclusive of any other right
which any person may have or hereafter acquire under this Certificate of
Incorporation, any statute, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. The Bylaws may contain such other
provisions concerning indemnification, including provisions specifying
reasonable procedures relating to and conditions to the receipt by indemnitees
of indemnification, provided that such provisions are not inconsistent with the
provisions of this Article VI.
SECTION 6.3. OTHER OFFICERS, EMPLOYEES AND AGENTS. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
grant rights to indemnification, and to the advancement of expenses, to any
other officer, employee or agent of the Corporation (or any person serving at
the Corporation's request as a director, trustee, officer, employee or agent of
another enterprise) or to any person who is or was a director, officer,
employee or agent of any of the Corporation's affiliates, predecessor or
subsidiary corporations or of a constituent corporation absorbed by the
Corporation in a consolidation or merger or who is or was serving at the
request of such affiliate, predecessor or subsidiary corporation or of such
constituent corporation as a director, trustee, officer, employee or agent of
another enterprise, in each case as determined by the Board of Directors to the
fullest extent of the provisions of this Article VI in cases of the
indemnification and advancement of expenses of directors and Board-elected
officers of the Corporation, or to any lesser extent (or greater extent, if
permitted by law) determined by the Board of Directors. If so indemnified,
such persons shall be included in the term "indemnitee" or "indemnitees" as
used in this Article VI and in the Bylaws of the Corporation.
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ARTICLE VII
LIMITATION ON LIABILITY OF DIRECTORS
No person shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director;
provided, however, that the foregoing shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal benefit.
If the Delaware General Corporation Law is amended hereafter to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. Any amendment, repeal or modification of this
Article VII shall not adversely affect any right or protection of a director of
the Corporation existing hereunder with respect to any act or omission
occurring prior to such amendment, repeal or modification. For purposes of
this Article VIII, "fiduciary duty as a director" also shall include any
fiduciary duty arising out of serving at the Corporation's request as a
director of another corporation, partnership, limited liability company, joint
venture or other enterprise, and "personal liability to the Corporation or its
stockholders" also shall include any liability to such other corporation,
partnership, limited liability company, joint venture, trust or other
enterprise, and any liability to the Corporation in its capacity as a security
holder, joint venturer, partner, beneficiary, creditor or investor of or in any
such other corporation, partnership, limited liability company, joint venture,
trust or other enterprise.
ARTICLE VIII
COMPROMISE
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this
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Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right at any time and from time to time
to amend, alter, change or repeal any provisions contained in this Certificate
of Incorporation; and other provisions authorized by the Delaware General
Corporation Law at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law; and all rights, preferences and privileges
of whatsoever nature conferred upon stockholders, directors or any other person
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the right reserved in this
Article.
ARTICLE X
SEVERABILITY
In the event that any of the provisions of this Certificate of
Incorporation (including any provision within a single Section, paragraph or
sentence) is held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, the remaining provisions are severable and shall
remain enforceable to the full extent permitted by law.
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed by Mark W. Reynolds, the Corporation's authorized
officer, this 27th day of December, 1996.
VAXCEL, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
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EXHIBIT 3.2
B Y L A W S
OF
VAXCEL, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES AND FISCAL YEAR
SECTION 1.01. Registered Office. The registered office of the
corporation shall be in the City of Dover, County of Kent, State of Delaware
until otherwise established by resolution of the board of directors, and a
certificate certifying the change is filed in the manner provided by statute.
SECTION 1.02. Other Offices. The corporation may also have offices at
such other places within or without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation
requires.
SECTION 1.03. Fiscal Year. The fiscal year of the corporation shall
end on the 31st of December in each year.
ARTICLE II
NOTICE - WAIVERS - MEETINGS
SECTION 2.01. Notice, What Constitutes. Whenever, under the
provisions of the Delaware General Corporation Law ("GCL") or the certificate
of incorporation or of these bylaws, notice is required to be given to any
director or stockholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by mail or by telegram (with messenger
service specified), telex or TWX (with answerback received) or courier service,
charges prepaid, or by facsimile transmission to the address (or to the telex,
TWX, facsimile or telephone number) of the person appearing on the books of the
corporation, or in the case of directors, supplied to the corporation for the
purpose of notice, If the notice is sent by mail, telegraph or courier service,
it shall be deemed to be given when deposited in the United States mail or with
a telegraph office or courier service for delivery to that person or, in the
case of telex or TWX, when dispatched, or in the case of facsimile
transmission, when received.
SECTION 2.02. Notice of Meetings of Board of Directors. Notice of a
regular meeting of the board of directors need not be given. Notice Of every
special meeting of the board of directors shall be given to each director by
telephone or in writing at least 24 hours (in the case of notice by telephone,
telex, TWX or facsimile transmission) or 49
<PAGE> 2
hours (in the case of notice by telegraph, courier service or express mail) or
five days (in the case of notice by first class mail) before the time at which
the meeting is to be held. Every such notice shall state the time and place of
the meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board need be specified in a notice of the
meeting.
SECTION 2.03. Notice of Meetings of Stockholders. Written notice of
the place, date and hour of every meeting of the stockholders, whether annual
or special, shall be given to each stockholder of record entitled to vote at
the meeting not less than ten nor more than 60 days before the date of the
meeting. Every notice of a special meeting shall state the purpose or purposes
thereof. If the notice is sent by mail, it shall be deemed to have been given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at the address of the stockholder as it appears on the records of
the corporation.
SECTION 2.04. Waiver of Notice.
(a) Written Waiver. Whenever notice is required to be given under
any provisions of the GCL or the certificate of incorporation or these bylaws,
a written waiver, signed by the person or persons entitled to the notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice of
such meeting.
(b) Waiver by Attendance. Attendance of a person at a meeting,
either in person or by proxy, shall constitute a waiver of notice of such
meeting, except where a person attends a meeting for the express purpose of
objecting at the beginning of the meeting to the transaction of any business
because the meeting was not lawfully called or convened.
SECTION 2.05. Exception to Requirements of Notice.
(a) General Rule. Whenever notice is required to be given, under
any provision of the GCL or of the certificate of incorporation or these
bylaws, to any person with whom communication is unlawful, the giving of such
notice to such person shall not be required and there shall be no duty to apply
to any governmental authority or agency for a license or permit to give such
notice to such person. Any action or meeting which shall be taken or held
without notice to any such person with whom communication is unlawful shall
have the same force and effect as if such notice had been duly given.
(b) Stockholders Without Forwarding Addresses. Whenever notice is
required to be given, under any provision of the GCL or the certificate of
incorporation or these bylaws, to any stockholder to whom (i) notice of two
consecutive annual meetings, and all notices of meetings or of the taking of
action by written consent without a meeting to such
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person during the period between such two consecutive annual meetings, or (ii)
all, and at least two, payments (if sent by first class mail) of dividends or
interest on securities during a 12 month period, have been mailed addressed to
such person at his address as shown on the records of the corporation and have
been returned undeliverable, the giving of such notice to such person shall not
be required. Any action or meeting which shall be taken or held without notice
to such person shall have the same force and effect as if such notice had been
duly given. if any such person shall deliver to the corporation a written
notice setting forth the person's then current address, the requirement that
notice be given to such person shall be reinstated.
SECTION 2.06. Conference Telephone Meetings. One or more directors
may participate in a meeting of the board, or of a committee of the board, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this section shall constitute presence
in person at such meeting.
ARTICLE III
MEETINGS OF STOCKHOLDERS
SECTION 3.01. Place of Meeting. All meetings of the stockholders of
the corporation shall be held at the registered office of the corporation, or
at such other place within or without the state of Delaware as shall be
designated by the board of directors in the notice of such meeting.
SECTION 3.02 Annual Meetings. The board of directors may fix and
designate the date and time of the annual misting of the stockholders, but if
no such date and time is fixed and designated by the board, the meeting for any
calendar year shall be held an the third Tuesday of May in such year, if not a
legal holiday under the laws of Delaware, and, if a legal holiday, then on the
next succeeding business day, not a Saturday, at 10:00 o'clock A.M., and at
said meeting the stockholders then entitled to vote shall elect directors and
shall transact such other business as may properly be brought before the
meeting.
SECTION 3.03. Special Meetings. Special meetings of the stockholders
of the corporation may be called at any time by the chairman of the board, a
majority of the board of directors, the president, or at the request, in
writing, of stockholders entitled to cast at least a majority of the votes that
all stockholders are entitled to cast at the particular meeting. At any time,
upon the written request of any person or persons who have duly called a
special meeting, which written request shall state the purpose or purposes of
the meeting, it shall be the duty of the secretary to fix the date of the
meeting which shall be held at such date and time as the secretary may fix, not
less than ten nor more than 60 days after the receipt of the request, and to
give due notice thereof. If the secretary shall neglect or refuse to fix the
time and date of such meeting and give notice thereof, the person or persons
calling the meeting may do so.
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SECTION 3.04. Quorum, Manner of Acting and Adjournment.
(a) Quorum. The holders of a majority of the shares entitled to
vote, present in person or represented by proxy, shall constitute a quorum at
all meetings of the stockholders except as otherwise provided by the GCL, by
the certificate of incorporation or by these bylaws. If a quorum is not
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is presenter represented. At any
such adjourned meeting at which a quorum is present or represented, the
corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
(b) Manner of Acting. Directors shall be elected by a plurality
of the votes of the shares present in person or represented by proxy at the
meeting and entitled to vote on the election of directors. In all matters
other than the election of directors, the affirmative vote of the majority of
shares present in person or represented by proxy at the meeting and entitled to
vote thereon shall be the act of the stockholders, unless the question is one
upon which, by express provision of the applicable statute, the certificate of
incorporation or these bylaws, a different vote is required in which case such
express provision shall govern and control the decision of the question. The
stockholders present in person or by proxy at a duly organized meeting can
continue to do business until adjournment, notwithstanding withdrawal of enough
stockholders to leave less than a quorum.
SECTION 3.05. Organization. At every meeting of the stockholders, the
chairman of the board, if there be one, or in the case of a vacancy in the
office or absence of the chairman of the board, one of the following persons
present in the order stated: the vice chairman, if one has been appointed, the
president, the vice presidents in their order of rank or seniority, a chairman
designated by the board of directors or a chairman chosen by the stockholders
entitled to cast a majority of the votes which all stockholders present in
person or by proxy are entitled to cast, shall act as chairman, and the
secretary, or, in the absence of the secretary, an assistant secretary, or in
the absence of the secretary and the assistant secretaries, a person appointed
by the chairman, shall act as secretary.
SECTION 3.06. Voting.
(a) General Rule. Unless otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote, in person or by
proxy, for each share of capital stock having voting power held by such
stockholder.
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(b) Voting and Other Action by Proxy.
(1) A stockholder may execute a writing authorizing
another person or persons to act for the stockholder as proxy. Such
execution may be accomplished by the stockholder or the authorized
officer, director, employee or agent of the stockholder signing such
writing or causing his or her signature to be affixed to such writing
by any reasonable means including, but not limited to, by facsimile
signature. A stockholder may authorize another person or persons to
act for the stockholder as proxy by transmitting or authorizing the
transmission of a telegram, cablegram, or other means of electronic,
transmission to the person who will be the holder of the proxy or to a
proxy solicitation firm, proxy support service organization or like
agent duly authorized by the person who will be the holder of the
proxy to receive such transmission if such telegram, cablegram or
other means of electronic transmission sets forth or is submitted with
information from which it can be determined that the telegram,
cablegram or other electronic transmission was authorized by the
stockholder.
(2) No proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period.
(3) A duly executed proxy shall be irrevocable if it
states that it is irrevocable and it, and only so long as, it is
coupled with an interest sufficient in law to support an irrevocable
power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself
or an interest in the corporation generally.
SECTION 3.07. Consent of Stockholders in Lieu of Meeting. Any action
required to be taken at any annual or special meeting of stockholders of the
corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action
so taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted and shall be delivered to the corporation by delivery to its
registered office in Delaware, its principal place of business, or an officer
or agent of the corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Every written consent shall bear the
date of signature of each stockholder who signs the consent and no written
consent shall be effective to take the corporate action referred to therein
unless, within 60 days of the earliest dated consent delivered in the manner
required in this section to the corporation, written consents signed by a
sufficient number of holders to take action are delivered to the corporation by
delivery to its registered office in Delaware, its principal place of business,
or an officer or agent of the corporation having custody of the book in which
proceedings of meeting of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. Prompt notice of the taking of the
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corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
SECTION 3.08. Voting Lists. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting. The list shall be arranged in alphabetical order, showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected by
any stockholder who is, present.
SECTION 3.09. Inspectors of Election.
(a) Appointment. All elections of directors shall be by written
ballot, unless otherwise provided in the certificate of incorporation; the vote
upon any other matter need not be by ballot. In advance of any meeting of
stockholders the board of directors may appoint one or more inspectors, who
need not be stockholders, to act at the meeting and to make a written report
thereof. The board of directors may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. if no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the person's best ability,
(b) Duties. The inspectors shall ascertain the number of shares
outstanding and the voting power of each, shall determine the shares
represented at the meeting and the validity of proxies and ballots, shall count
all votes and ballots, shall determine and retain for a reasonable period a
record of the disposition of any challenges made to any determination by the
inspectors, and shall certify their determination of the number of shares
represented at the meeting and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors.
(c) Polls. The date and time of the opening and the closing of
the polls for each matter upon which the stockholders will vote at a meeting
shall be announced at the meeting. No ballot, proxies or votes, nor any
revocations thereof or changes thereto, shall be accepted by the inspectors
after the closing of the polls unless the Court of Chancery upon application by
a stockholder shall determine otherwise.
(d) Reconciliation of Proxies and Ballots. In determining the
validity and counting of proxies and ballots, the inspectors shall be limited
to an examination of the
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proxies, any envelopes submitted with those proxies, any information
transmitted in accordance with section 2.07, ballots and the regular books and
records of the corporation, except that the inspectors may consider other
reliable information for the limited purpose of reconciling proxies and ballots
submitted by or on behalf of banks, brokers, their nominees or similar persons
which represent more votes than the holder of a proxy is authorized by the
record owner to cast or more votes than the stockholder holds of record. If
the inspectors consider other reliable information for the limited purpose
permitted herein, the inspectors at the time they make their certification
pursuant to subsection (b) shall specify the precise information considered by
them including the person or persons from whom they obtained the information,
when the information was obtained, the means by which the information was
obtained and the basis for the inspectors' belief that such information is
accurate and reliable.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 4.01. Powers. All powers vested by law in the corporation
shall be exercised by or under the authority of, and the business and affairs
of the corporation shall be managed under the direction of, the board of
directors.,
SECTION 4.02. Number and Term of Office. The Board of Directors shall
consist of such number of directors as provided in the Company's Certificate of
Incorporation. Each director shall hold office until his or her successor is
elected and qualified or until his or her earlier resignation or removal.
SECTION 4.03. Vacancies. Vacancies and newly created director!-.hips
resulting from any increase in the authorized number of directors elected by
all of the stockholders having a right to vote as a single class may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sale remaining director, and the directors so chosen shall hold office until
their successors are elected and qualified or until their earlier death,,
resignation or removal. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. Whenever the
holders of any class or classes of stock or series thereof are entitled to
elect one or more directors by the provisions of the certificate of
incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority by such class or classes or
series of the directors elected thereof then in office, or by a sole remaining
director so elected. If, at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
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SECTION 4.04. Resignations. Any director may resign at any time upon
written notice to the corporation. The resignation shall be effective upon
receipt thereof by the corporation or at such subsequent time as shall be
specified in the notice of resignation and, unless other-wise specified in the
notice, the acceptance of the resignation shall not be necessary to make it
effective.
SECTION 4.05. Removal. Any director or the entire board of directors
may be removed, with or without cause, by the holders of shares entitled to
cast a majority of the votes which all stockholders are entitled to cast at an
election of directors.
SECTION 4.06. Organization. At every meeting of the board of
directors, the chairman of the board, if there be one, or, in the case of a
vacancy in the office or absence of the chairman of the board, one of the
following officers present in the order stated: the vice chairman of the board,
if there be one, the president, the vice presidents in their order of rank and
seniority, or a chairman chosen by a majority of the directors present, shall
preside, and the secretary, or, in the absence of the secretary, an assistant
secretary, or in the absence of the secretary and the assistant secretaries,
any person appointed by the chairman of the meeting, shall act as secretary.
SECTION 4.07. Place of Meetings. Meetings of the board of directors
shall be held at such Place within or without the State of Delaware as the
board of directors may from time to time determine, or as may be designated in
the notice of the meeting.
SECTION 4.08. Regular Meetings. Regular meetings of the board of
directors shall be held without notice at such time and place as shall be
designated from time to time by resolution of the board of directors.
SECTION 4.09. Special Meetings. Special meetings of the board of
directors shall be held whenever called by the President or by two or more of
the directors.
SECTION 4.10. Quorum, Manner of Acting and Adjournment.
(a) General Rule. At all meetings of the board one-third of the
total number of directors shall constitute a quorum for the transaction of
business. The vote of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the board of directors, except as
may be otherwise specifically provided by the GCL or by the certificate of
incorporation. if a quorum is not present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present.
(b) Unanimous Written Consent. Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors may be taken without a meeting, if all
members of the board consent thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the board.
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SECTION 4.11. Executive and Other Committees.
(a) Establishment. The board of directors may, by resolution
adopted by a majority of the whole board, establish an Executive Committee and
one or more other committees, each committee to consist of one or more
directors. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. in the absence or disqualification of a member of a
committee and the alternate or alternates, if any, designated for such member,
the member or members of the committee present at any meeting and not
disqualified from voting, whether or not they constitute a quorum, may
unanimously appoint another director to act at the meeting in the place of any
such absent or disqualified member.
(b) Powers. The Executive Committee, if established, and any such
other committee to the extent provided in the resolution establishing such
committee shall have and may exercise all the power and authority of the board
of directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority in
reference to amending the certificate of incorporation (except that a committee
may, to the extent authorized in the resolution or, resolutions providing for
the issuance of shares of stock adopted by the board of directors as provided
in Section 151(a) of the GCL, fix the designation and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of shares of any series), adopting an agreement of merger or
consolidation under Section 251 or 252 of the GCL, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending
the bylaws of the corporation. The Executive Committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock and to
adopt a certificate of ownership and merger pursuant to Section 253 of the GCL.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the board of directors. Each
committee so formed shall keep regular minutes of its meetings and report the
same to the board of directors when required.
(c) Committee Procedures. The term "board of directors" or
"board," when used in any provision of these bylaws relating to the
organization or procedures of or the manner of taking action by the board of
directors, shall be construed to include and refer to the Executive Committee
or other committee of the board.
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SECTION 4.12. Compensation of Directors. Unless otherwise restricted
by the certificate of incorporation, the board of directors shall have the
authority to fix the compensation of directors.
ARTICLE V
OFFICERS
SECTION 5.01. Number, Qualifications and Designation. The officers of
the corporation shall be chosen by the board of directors and shall be a
president, one or more vice presidents, a secretary, a treasurer, and such
other officers as may be elected in accordance with the provisions of section
5.03 of this Article. Any number of offices may be held by the same person.
Officers may, but need not, be directors or stockholders of the corporation.
The board of directors may elect from among the members of the board a chairman
of the board and a vice chairman of the board who shall be officers of the
corporation. The chairman of the board or the president, as designated from
time to time by the board or directors, shall be the chief executive officer of
the corporation.
SECTION 5.02. Election and Term of Office. The officers of the
corporation, except those elected by delegated authority pursuant to section
5.03 of this Article, shall be elected annually by the board of directors, and
each such officer shall hold office for a term of one year and until a
successor is elected and qualified, or until his or her earlier resignation or
removal. Any officer may resign at any time upon written notice to the
corporation.
SECTION 5.03. Subordinate Officers; Committees and Agents. The board
of directors may from time to time elect such other officers and appoint such
committees, employees or other agents as it deems necessary, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as are provided in these bylaws, or as the board of directors may from
time to time determine. The board of directors may delegate to any officer or
committee the power to elect subordinate officers and to retain or appoint
employees or other agents, or committees thereof, and to prescribe the
authority and duties of such subordinate officers, committees, employees or
other agents.
SECTION 5.04. The Chairman and Vice Chairman of the Board. The
chairman of the board, if there be one, or in the absence of the chairman, the
vice chairman of the board, if there be one, shall preside at all meetings of
the stockholders and of the board of directors, and shall perform such other
duties as May from time to time be assigned to them by the board of directors.
SECTION 5.05. The President. The_president shall have general
supervision over the business and operations of the corporation, subject,
however, to the control of the board of directors. The president shall, in
general, perform all duties incident to the office of president, and such other
duties as from time to time may be assigned by the board of
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directors and, if the chairman of the board is the chief executive officer, the
chairman of the board.
SECTION 5.06. The Vice Presidents. The vice presidents shall perform
the duties of the president in the absence of the president and such other
duties as may from time to time be assigned to them by the board of directors
or by the president.
SECTION 5.07. The Secretary. The secretary, or an assistant
secretary, shall attend all meetings of the stockholders and of the board of
directors and shall record the proceedings of the stockholders and of the
directors and of committees of the board in a book or books to be kept for that
purpose; shall see that notices are given and records and reports properly kept
and filed by the corporation as required by law; shall be the custodian of the
seal of the corporation and see that it is affixed to all documents to be
executed on behalf of the corporation under its seal; and, in general, shall
perform all duties incident to the office of secretary, and such other duties
as may from time to time be assigned by the board of directors or the
president.
SECTION 5.08. The Treasurer. The treasurer, or an assistant
treasurer, shall have or provide for the custody of the funds or other property
of the corporation; shall collect and receive or provide for the collection and
receipt of moneys earned by or in any manner due to or received by the
corporation; shall deposit all funds in his or her custody as treasurer in such
banks or other places of deposit as the board of directors may from time to
time designate; whenever so required by the board of directors, shall render an
account showing his or her transactions as treasurer and the financial
condition of the corporation; and, in general, shall discharge such other
duties as may from time to time be assigned by the board of directors or the
president.
SECTION 5.09. Officers' Bonds. No officer of the corporation need
provide a bond to guarantee the faithful discharge of the officer's duties
unless the board of directors shall by resolution so require a bond in which
event such officer shall give the corporation a bond (which shall be renewed if
and as required) in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of office.
SECTION 5.10. Salaries. The salaries of the officers and agents of
the corporation elected by the board of directors shall be fixed from time to
time by the board of directors.
ARTICLE VI
CERTIFICATES OF STOCK, TRANSFER, ETC.
SECTION 6.01. Form and lssuance.
(a) Issuance. The shares of the corporation shall be represented
by certificates unless the board of directors shall by resolution provide that
some or all of any class or
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series of stock shall be uncertificated shares. Any such resolution shall not
apply to shares represented by a certificate until the certificate is
surrendered to the corporation. Notwithstanding the adoption of any resolution
providing for uncertificated shares, every holder of-stock represented by
certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the corporation by,
the chairman or vice chairman of the board of directors, or the president or
vice president, and by the treasurer or an assistant treasurer, or the
secretary or an assistant secretary, representing the number of shares
registered in certificate form.
(b) Form and Records. Stock certificates of the corporation shall
be in such form as approved by the board of directors. The stock record books
and the blank stock certificate books shall be kept by the secretary or by any
agency designated by the board of directors for that purpose. The stock
certificates of the corporation shall be numbered and registered in the stock
ledger and transfer books of the corporation as they are issued.
(c) Signatures. Any of or all the signatures upon the stock
certificates of the corporation may be a facsimile. in case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon, any share certificate shall have ceased to be such-officer,
transfer agent or registrar, before the certificate is issued, it may be issued
with the same effect as if the signatory were such officer, transfer agent or
registrar at the date of its issue.
SECTION 6.02. Transfer. Transfers of shares shall be made on the
share register or transfer books of the corporation upon surrender of the
certificate therefor, endorsed by the person named in the certificate or by an
attorney lawfully constituted in writing. No transfer shall be made which
would be inconsistent with the provisions of Article 8, Title 6 of the Delaware
Uniform Commercial Code Investment Securities.
SECTION 6.03. Lost, Stolen, Destroyed or Mutilated Certificates. The
board of directors may direct a new certificate of stock or uncertificated
shares to be issued in place of any certificate theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or the legal representative of the
owner, to give the corporation a bond sufficient to indemnity against any claim
that may be made against the corporation on account of the alleged loss, theft
or destruction of such certificate or the issuance of such new certificate or
uncertificated shares.
SECTION 6.04. Record Holder of Shares. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other
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person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
SECTION 6.05. Determination of Stockholders of Record.
(a) Meetings of Stockholders. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which record date shall not be more than 60 nor less than ten days before the
date of such meeting. If no record date is fixed by the board of directors,
the record date for determining stockholders entitled to notice of or to vote
at a meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date for the adjourned
meeting.
(b) Consent of Stockholders. In order that the corporation may
determine the stockholders entitled to consent to corporate action in writing
without a meeting, the board of directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record
date is adopted by the board of directors, and which date shall not be more
than ten days after the date upon which the resolution fixing the record date
is adopted by the board of directors. If no record date has been fixed by the
board of directors, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is required by the GCL, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered office in
Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
if no record date has been fixed by the board of directors and prior action by
the board of directors is required by the GCL, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the board of
directors adopts the resolution taking such prior action.
(c) Dividends. In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights of the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than
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60 days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the board of directors adopts the resolution relating
thereto.
ARTICLE VII
INDEMNIFICATION
SECTION7.01. Indemnification Provisions in Certificate of
Incorporation. The provisions of this Article VII are intended to supplement
Article VI of the Certificate of Incorporation pursuant to Sections 6.2 and 6.3
thereof. To the extent that this Article VII contains any provisions
inconsistent with said Article VI, the provisions of the Certificate of
Incorporation shall govern. Terms defined in such Article VI shall have the
same meaning in this Article VII.
SECTION 7.02. Indemnification of Others. The Corporation may
indemnify and advance expenses to its other officers, employees and agents to
the same extent as to its directors and Board-elected officers, as set forth in
the Certificate of Incorporation and in this Article VII of the Bylaws of the
Corporation, and, if so indemnified, such persons shall be included in the term
"indemnitee" or "indemnitees" as used in this Article VII of the Bylaws.
SECTION 7.03. Undertakings for Advances of Expenses. If and to the
extent the Delaware General Corporation Law requires, an advancement by the
Corporation of expenses incurred by an indemnitee pursuant to clause (iii) of
the last sentence of Section 6.1 of the Certificate of Incorporation
(hereinafter an "advancement of expenses") shall be made only upon delivery to
the Corporation of an undertaking (hereinafter an "undertaking"), by or on
behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under Article VI
of the Certificate of Incorporation or otherwise.
SECTION 7.04. Claims for Indemnification. If a claim for
indemnification under Section 6.1 of the Certificate of Incorporation is not
paid in full by the Corporation within 60 days after it has been received in
writing by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be 20 days, the indemnitee
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim. If the indemnitee is successful in whole or in
part in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a defense that, and
in any suit by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking the Corporation shall be entitled to recover
such expenses only
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upon a final adjudication that, the indemnitee has not met the applicable
standard of conduct set forth in Section 145 of the Delaware General
Corporation Law (or any successor provision or provisions). Neither the
failure of the Corporation (including the Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in Section 145 of the Delaware General Corporation Law (or
any successor provision or provisions), nor an actual determination by the
Corporation (including the Board of Directors, independent legal counsel, or
its stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee
to enforce a right to indemnification or to an advancement of expenses
hereunder, or by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the burden of proving that the indemnitee is
not entitled to be indemnified, or to have or retain such advancement of
expenses, under Article VI of the Certificate of Incorporation or this Article
VII or otherwise, shall be on the Corporation.
SECTION 7.05. Insurance. The Corporation may maintain insurance, at
its expense, to protect itself and any director, trustee, officer, employee or
agent of the Corporation or another enterprise against any expense, liability
or loss, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the Delaware General
Corporation Law.
SECTION7.06. Severability. In the event that any of the provisions of
this Article VII (including any provision within a single section, paragraph or
sentence) is held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, the remaining provisions are severable and shall
remain enforceable to the full extent permitted by law.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Dividends. Subject to the restrictions contained in the
GCL and any restrictions contained in the certificate of incorporation, the
board of directors may declare and pay dividends upon the shares of capital
stock of the corporation.
SECTION 8.02. Contracts. Except as otherwise provided in these
bylaws, the board of directors may authorize any officer or officers including
the chairman and, vice chairman of the board of directors, or any agent or
agents, to enter into any contract or to execute or deliver any instrument on
behalf of the corporation and such authority may be general or confined to
specific instances.
SECTION 8.03. Corporate Seal. The corporation shall have a corporate
seal, which shall have inscribed thereon the name of the corporation, the year
of its organization
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and the words Corporate Seal, Delaware". The seal may be used by causing it or
a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
SECTION 8.04. Deposits. All funds of the corporation shall be
deposited from time to time to the credit of the corporation in such banks,
trust companies, or other depositories as the board of directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by
such one or more officers or employees as the board of directors shall from
time to time determine.
SECTION 8.05 Corporate Records.
(a) Examination by Stockholders. Every stockholder shall, upon
written demand under oath stating the purpose thereof, have a right to examine,
in person or by agent or attorney, during the usual hours for business, for any
proper purpose, the stock ledger, list of stockholders, books or records of
account, and records of the proceedings of the stockholders and directors of
the corporation, and to make copies or extracts therefrom. A proper purpose
shall mean a purpose reasonably related to such person's interest as a
stockholder. In every instance where an attorney or other agent shall be the
person who seeks the right to inspection, the demand under oath shall be
accompanied by such other writing which authorizes the power of attorney or
other on behalf of the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the corporation at its
registered office in Delaware or at its principal place of business. where the
stockholder seeks to inspect the books and records of the corporation, other
than its stock ledger or list of stockholders, the stockholder shall first
establish (1) that the stockholder has complied with the provisions of this
section respecting the form and manner of making demand for inspection of such
documents; and (2) that the inspection sought is for a proper purpose. Where
the stockholder seeks to inspect the stock ledger or list of stockholders of
the corporation and has complied with the provisions of this section respecting
the form and manner of making demand for inspection of such documents, the
burden of proof shall be upon the corporation to establish that the inspection
sought is for an improper purpose.
(b) Examination by Directors. Any director shall have the right
to examine the corporation's stock ledger, a list of its stockholders and its
other books and records for a purpose reasonably related to the person's
position as a director.
SECTION 8.06. Amendment of Bylaws. These bylaws may be altered,
amended or repealed or new bylaws may be adopted either (1) by vote of the
stockholders at a duly organized annual or special meeting of stockholders, or
(2) by vote of a majority of the board of directors at any regular or special
meeting of directors if such power is conferred upon the board of directors by
the certificate of incorporation.
- 16 -
<PAGE> 1
Exhibit 5.1
[Alston & Bird Letterhead]
Vaxcel, Inc.
154 Technology Parkway
Norcross, Georgia 30092
Gentlemen:
This opinion is given in connection with the filing by Vaxcel, Inc., a
corporation organized and existing under the laws of the State of Delaware
("Vaxcel"), with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, of a Registration Statement on Form S-4 on December __,
1996 (the "Registration Statement"), pursuant to which up to approximately
________ shares of Vaxcel's common stock, $0.001 par value per share (the
"Common Stock"), are to be registered for issuance in connection with the
proposed Merger (the "Merger") of Vaxcel Merger Subsidiary, Inc. ("Vaxcel Merger
Sub"), a newly formed wholly-owned subsidiary of Vaxcel, organized and existing
under the laws of the State of Georgia, with and into Zynaxis, Inc. ("Zynaxis"),
a corporation organized and existing under the laws of the Commonwealth of
Pennsylvania.
The Merger intended to be effected pursuant to an Agreement and Plan of
Merger and Contribution, dated as of December 6, 1996 (the "Agreement"), by and
among Zynaxis, Vaxcel, Vaxcel Merger Sub and CytRx Corporation ("CytRx"), a
corporation organized and existing under the laws of the state of Delaware and
the sole shareholders of Vaxcel, pursuant to which each issued and outstanding
share of the $.01 par value common stock and the no par value Series A
convertible preferred stock of Zynaxis (collectively, the "Zynaxis Capital
Stock") issued and outstanding immediately prior to the effective time of the
Merger will be exchanged for the right to receive shares of Vaxcel Common Stock.
In addition, pursuant to a Note Exchange Agreement, dated December 6,
1996, by and among Zynaxis, CytRx, Vaxcel and Euclid Partners III, L.P. and
S.R. One Ltd. (the "Noteholders"), the Notehlders agreed to convert convertible
promissary notes of Zynaxis to shares of Vaxcel Common Stock in connection
with the Merger.
In rendering this opinion, we have examined such corporate records and
documents as we have deemed, relevant and necessary as the basis for the opinion
set forth herein.
Based on the foregoing, it is our opinion that the shares of Vaxcel
Common Stock included in the Registration Statement when issued to the holders
of Zynaxis Capital Stock in connection with the Merger will have been duly
authorized by all requisite actions on the part of Vaxcel, will be legally and
validly issued, fully paid, and nonassessable.
We hereby consent to the filing of this opinion Statement and to the
reference made to the firm under the caption "Legal Matters" in the Proxy
Statement/Prospectus constituting part of the Registration Statement.
Very truly yours,
Alston & Bird
<PAGE> 1
[Alston & Bird Letterhead]
EXHIBIT 8.1
Philip C. Cook Direct Dial: 404-881-7000
[FORM OF TAX OPINION]
February __, 1996
CytRx Corporation
154 Technology Parkway
Norcross, Georgia 30092
Attn: Jack L Luchese
Vaxcel, Inc.
154 Technology Parkway
Norcross, Georgia 30092
Attn: Paul Wilson
Zynaxis, Inc.
371 Phoenixville Pike
Malvern, Pennsylvania 19355
Attn: Marty D. Greenacre
Re: PROPOSED CONTRIBUTIONS TO VAXCEL, INC. BY CYTRX CORPORATION, THE
ZYNAXIS SHAREHOLDERS AND THE ZYNAXIS NOTEHOLDERS
Gentlemen:
We have acted as counsel to CytRx Corporation ("CytRx") and Vaxcel,
Inc., a wholly-owned subsidiary of CytRx ("Vaxcel"), in connection with the
transfer of property to Vaxcel by a group of transferors (collectively, the
"Transferor Group," and individually a "Transferor") in exchange for Vaxcel
Common Stock and warrants to purchase Vaxcel Common Stock (the "Exchange"). The
Transferor Group consists of (i) CytRx, (ii) the existing shareholders of
Zynaxis (the "Zynaxis Shareholders"), and (iii) Euclid Partners III, L.P. and
S.R. ONE, Ltd. (the "Noteholders").
In our capacity as counsel to CytRx and Vaxcel, our opinion has been
requested with respect to the qualification of the Exchange as a tax-free
organization under Section 351 of the Internal Revenue Code of 1986, as amended
(the "Code"). All capitalized terms used herein without definition shall have
the respective meanings specified in the
<PAGE> 2
December 30, 1996
Page 2
Agreement and Plan of Merger and Contribution dated as of December 6, 1996 (the
"Agreement"). Unless otherwise specified, all Section references herein are to
the Code.
INFORMATION RELIED UPON
In rendering the opinions expressed herein, we have examined such
documents as we have deemed appropriate, including:
(1) The Agreement;
(2) the Note Exchange Agreement;
(3) the Preferred Stock and Warrant Agreement;
(4) the Secured Loan Agreement;
(5) the Senior Secured Note; and
(6) Such additional documents as we have considered relevant
(together, the "Agreements").
In our examination of such documents, we have assumed, with your
consent, that all documents submitted to us as photocopies faithfully reproduce
the originals thereof, that such originals are authentic, that all such
documents have been or will be duly executed to the extent required, and that
all statements set forth in such documents are accurate.
We have also obtained such additional information and representations
as we have deemed relevant and necessary through consultation with various
officers and representatives of CytRx, Vaxcel, and Zynaxis.
SUMMARY OF THE TRANSACTION
You have advised us that the Transferor Group desires to consolidate
the activities of Vaxcel and Zynaxis, including the development of technologies.
To achieve this goal, the members of the Transferor Group will transfer the
following property to Vaxcel pursuant to the Agreement:
(i) CytRx will contribute the Senior Credit Facility and an amount of
cash (the "Cash Payment");
<PAGE> 3
December 30, 1996
Page 3
(ii) the Zynaxis Shareholders will contribute all of the outstanding
shares of Zynaxis Capital Stock and warrants to purchase Zynaxis Capital Stock
to Vaxcel by means of a merger (the "Merger") of Vaxcel Merger Sub, a
newly-formed, wholly-owned subsidiary of Vaxcel, with and into Zynaxis; and
(iii) the Noteholders will contribute the convertible demand promissory
notes issued by Zynaxis (the "Notes") to Vaxcel by means of the Merger.
CYTRX
(1) In the Exchange, CytRx will contribute the Senior Credit Facility
and the Cash Payment. The amount of the Cash Payment to be contributed by CytRx
will be equal to the excess, if any, of $4,000,000 over the sum, as of the
Closing Date, of (i) the aggregate principal and interest balance outstanding
under the Senior Secured Note; and (ii) the product of (A) the Per Share Price
multiplied by (B) the number of votes entitled to be cast by the holders of
Zynaxis Capital Stock who elect to exercise their statutory dissenters' rights
or their objection rights, if any, under Section 2545 of the PBCL in excess of
three percent (3%) of the votes that could be cast by all holders of Zynaxis
Capital Stock voting together as a single class. In the Exchange, Vaxcel will
deliver to CytRx: (a) one certificate for One Million Three Hundred Seventy Four
Thousand Nine Hundred Ninety-Six (1,374,996) shares of Vaxcel Common Stock; (b)
a certificate for a number of shares of Vaxcel Common Stock equal to the product
of the Exchange Ratio, as defined in the Agreement, times the number of shares
of Zynaxis Common Stock for which Vaxcel is required to pay cash pursuant to
Section 3.4(b) of the Agreement and the provisions of the PBCL to which it
refers; and (c) a warrant agreement substantially in the form of Exhibit 1 to
the Agreement (the "CytRx Warrant").
ZYNAXIS MERGER
(2) Vaxcel Merger Sub will be organized as a corporation under the laws
of the State of Georgia, but will conduct no business activities other than
consummation of the Merger.
(3) Subject to the terms and conditions of the Agreement, at the
Effective Time, Vaxcel Merger Sub shall be merged with and into Zynaxis in
accordance with the provisions of Section 1921 et seq. of the PBCL and Sections
252 and 258 of the DGCL and with the effects provided in Section 1929 of the
PBCL and 259 of the DGCL. Zynaxis shall be the Surviving Corporation resulting
from the Merger and shall become a wholly owned Subsidiary of Vaxcel and shall
continue to be governed by the Laws of the Commonwealth of Pennsylvania. The
Merger shall be consummated pursuant to the terms of this Agreement, which has
been approved and adopted by the respective Boards of
<PAGE> 4
December 30, 1996
Page 4
Directors of CytRx, Zynaxis, Vaxcel Merger Sub, and Vaxcel, and by Vaxcel, as
the sole stockholder of Vaxcel Merger Sub.
(4) Subject to the provisions of Article 3 of the Agreement, at the
Effective Time, by virtue of the Merger and without any action on the part of
CytRx, Vaxcel, Vaxcel Merger Sub, or Zynaxis, or the shareholders of any of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of capital stock of Vaxcel issued and
outstanding immediately prior to the Effective Time shall remain issued
and outstanding from and after the Effective Time.
(b) Each share of Vaxcel Merger Sub Common Stock issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into one share of Zynaxis Common
Stock.
(c) Each share of Zynaxis Common Stock (excluding shares held
by any Zynaxis Company or any Vaxcel Company, and excluding shares held
by shareholders who perfect their statutory dissenters' rights or
objection rights under Section 2545 of PBCL as provided in Section 3.3 of
the Agreement) issued and outstanding immediately prior to the Effective
Time shall cease to be outstanding and shall be converted into and
exchanged for the right to receive a number of shares of Vaxcel Common
Stock equal to the Exchange Ratio.
(d) Each share of Zynaxis Preferred Stock (excluding shares
held by any Zynaxis Company or any Vaxcel Company, and excluding shares
held by shareholders who perfect their statutory dissenters' rights or
objection rights under Section 2545 of PBCL as provided in Section 3.3 of
the Agreement) issued and outstanding immediately prior to the Effective
Time shall cease to be outstanding and shall be converted into and
exchanged for the right to receive the number of shares of Vaxcel Common
Stock equal to two times the Exchange Ratio.
(5) Any holder of shares of Zynaxis Capital Stock who perfects his or
her dissenters' rights in accordance with and as contemplated by Section 1930 of
the PBCL shall be entitled to receive the value of such shares in cash as
determined pursuant to such provision of Law; provided, that no such payment
shall be made to any dissenting shareholder unless and until such dissenting
shareholder has complied with the applicable provisions of the PBCL and
surrendered to Zynaxis the certificate or certificates representing the shares
for which payment is being made. In the event that after the Effective Time a
dissenting shareholder of Zynaxis fails to perfect, or effectively withdraws or
loses, his right to appraisal and of payment for his shares, Vaxcel shall issue
<PAGE> 5
December 30, 1996
Page 5
and deliver the consideration to which such holder of shares of Zynaxis Capital
Stock is entitled under Article 3 of the Agreement (without interest) upon
surrender by such holder of the certificate or certificates representing shares
of Zynaxis Capital Stock held by him. If and to the extent required by
applicable Law, Vaxcel will establish (or cause to be established) an escrow
account with an amount sufficient to satisfy the maximum aggregate payment that
may be required to be paid to dissenting shareholders. Upon satisfaction of all
claims of dissenting shareholders, the remaining escrowed amount, reduced by
payment of the fees and expenses of the escrow agent, will be returned to
Vaxcel.
(6) Any holder of shares of Zynaxis Capital Stock who objects to the
transaction and in accordance with and as contemplated by Sections 2544 and 2546
of the PBCL shall be entitled to receive the value of such shares in cash as
determined pursuant to such provision of Law; provided, that no such payment
shall be made to any objecting shareholder unless and until such objecting
shareholder has complied with the applicable provisions of the PBCL and
surrendered to Zynaxis the certificate or certificates representing the shares
for which payment is being made. In the event that after the Effective Time an
objecting shareholder of Zynaxis fails to give proper notice and surrender his
certificates as required by Section 2547 of the PBCL, or otherwise effectively
withdraws or loses his right to appraisal and of payment for his shares, Vaxcel
shall issue and CytRx and Vaxcel shall deliver the consideration to which such
holder of shares of Zynaxis Capital Stock is entitled under Article 3 of the
Agreement (without interest) upon surrender by such holder of the certificate or
certificates representing shares of Zynaxis Capital Stock held by him. If and to
the extent required by applicable Law, Vaxcel will establish (or cause to be
established) an escrow account with an amount sufficient to satisfy the maximum
aggregate payment that may be required to be paid to objecting shareholders.
Upon satisfaction of all claims of objecting shareholders, the remaining
escrowed amount, reduced by payment of the fees and expenses of the escrow
agent, will be returned to Vaxcel.
(7) Notwithstanding any other provision of the Agreement, each holder
of shares of Zynaxis Common Stock and each holder of shares of Zynaxis Preferred
Stock exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Vaxcel Common Stock (after taking into account
all whole shares delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Vaxcel Common Stock divided by the Exchange Ratio and multiplied by the Per
Share Price.
(8) At the Effective Time, each option or other Equity Right to
purchase shares of Zynaxis Common Stock pursuant to stock options or stock
appreciation rights ("Zynaxis Options") granted by Zynaxis under the Zynaxis
Stock Plan which are
<PAGE> 6
December 30, 1996
Page 6
outstanding at the Effective Time, whether or not exercisable, shall be
converted into and become rights with respect to Vaxcel Common Stock, and Vaxcel
shall assume each Zynaxis Option, in accordance with the terms of the Zynaxis
Stock Plan and stock option agreement by which it is evidenced on substantially
the same terms and conditions.
(9) As soon as practicable after the Effective Time, Vaxcel shall
deliver to the participants in the Zynaxis Stock Plan an appropriate notice
setting forth such participant's rights pursuant thereto and the grants subject
to the Zynaxis Stock Plan shall continue in effect on the same terms and
conditions (subject to the adjustments required by Section 3.5(a) of the
Agreement after giving effect to the Merger), and Vaxcel shall comply with the
terms of the Zynaxis Stock Plan to ensure, to the extent required by, and
subject to the provisions of, such Zynaxis Stock Plan, that Zynaxis Options
which qualified as incentive stock options prior to the Effective Time continue
to qualify as incentive stock options after the Effective Time. At or prior to
the Effective Time, Vaxcel shall take all corporate action necessary to reserve
for issuance sufficient shares of Vaxcel Common Stock for delivery upon exercise
of Zynaxis Options assumed by it in accordance with Section 3.5 of the
Agreement. As soon as practicable after the Effective Time, Vaxcel shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of Vaxcel
Common Stock subject to such options and shall use its reasonable efforts to
maintain the effectiveness of such registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such options remain outstanding.
(10) All contractual restrictions or limitations on transfer with
respect to Zynaxis Common Stock awarded under the Zynaxis Stock Plan or any
other plan, program, Contract or arrangement of any Zynaxis Company, to the
extent that such restrictions or limitations shall not have already lapsed
(whether as a result of the Merger or otherwise), and except as otherwise
expressly provided in such plan, program, Contract or arrangement, shall remain
in full force and effect with respect to shares of Vaxcel Common Stock into
which such restricted stock is converted pursuant to Section 3.1 of the
Agreement.
ZYNAXIS WARRANTS
(11) At the Effective Time, each warrant to purchase shares of Zynaxis
Common Stock which is outstanding at the Effective Time and is held by a party
to the Preferred Stock and Warrant Agreement (a "Securityholder") shall be
exchanged for a warrant to purchase a number of shares of Vaxcel Common Stock
equal to: (i) the number of shares of Common Stock of Zynaxis as the Warrants
held by such undersigned are exercisable to purchase at that time multiplied by
(ii) the Exchange Ratio (the "New
<PAGE> 7
December 30, 1996
Page 7
Warrant") in accordance with the terms of the Agreement and the Preferred Stock
and Warrant Agreement.
(12) At the Effective Time, each warrant to purchase shares of Zynaxis
Common Stock which is outstanding at the Effective Time and is not being
exchanged for a warrant to purchase Vaxcel Common Stock in accordance with
Section 3.6 of the Agreement and pursuant to the Preferred Stock and Warrant
Agreement (a "Non-Financing Warrant") shall be converted into and become a
warrant to purchase shares of Vaxcel Common Stock, and Vaxcel shall assume each
such warrant, in accordance with the terms of the warrant agreement by which it
is evidenced, except that from and after the Effective Time, (i) each
Non-Financing Warrant assumed by Vaxcel may be exercised solely for shares of
Vaxcel Common Stock, (ii) the number of shares of Vaxcel Common Stock subject to
such Non-Financing Warrant shall be equal to the number of shares of Zynaxis
Common Stock subject to such Non-Financing Warrant immediately prior to the
Effective Time multiplied by the Exchange Ratio, and (iii) the per share
exercise price under each such Non-Financing Warrant shall be adjusted by
dividing the per share exercise price under each such Non-Financing Warrant by
the Exchange Ratio and rounding up to the nearest cent. Notwithstanding the
provisions of clause (ii) of the preceding sentence, Vaxcel shall not be
obligated to issue any fraction of a share of Vaxcel Common Stock upon exercise
of such Non-Financing Warrants and any fraction of a share of Vaxcel Common
Stock that otherwise would be subject to a converted Non-Financing Warrant shall
represent the right to receive a cash payment upon exercise of such converted
Non-Financing Warrant equal to the product of such fraction and the difference
between the market value of one share of Vaxcel Common Stock at the time of
exercise of such converted Non-Financing Warrant and the per share exercise
price of such converted Non-Financing Warrant. The market value of one share of
Vaxcel Common Stock at the time of exercise of a converted Non-Financing Warrant
shall be the last sale price of a share of Vaxcel Common Stock on the Nasdaq
SmallCap Market (as reported by The Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Vaxcel) on the last trading
day preceding the date of exercise.
(13) As soon as practicable after the Effective Time, Vaxcel shall
deliver to the holders of Non-Financing Warrants an appropriate notice setting
forth such participant's rights pursuant thereto and the converted Non-Financing
Warrants shall continue in effect on the same terms and conditions (subject to
the adjustments required by Section 3.7(a) of the Agreement after giving effect
to the Merger). At or prior to the Effective Time, Vaxcel shall take all
corporate action necessary to reserve for issuance sufficient shares of Vaxcel
Common Stock for delivery upon exercise of converted Non-Financing Warrants
assumed by it in accordance with Section 3.7 of the Agreement.
<PAGE> 8
December 30, 1996
Page 8
ZYNAXIS NOTEHOLDERS
(14) Upon consummation of the Merger, each Note held by a Noteholder
shall be exchanged for the number of shares (the "Note Shares") of Vaxcel Common
Stock equal to the Exchange Ratio multiplied by the quotient (rounded down to
the nearest whole share) obtained by dividing the unpaid principal amount of
such Note, together with unpaid interest thereon accrued through September 30,
1996, by the Per Share Price. At the Closing each holder of a Note shall deliver
its Notes to Vaxcel who shall then contribute such Notes to the capital of
Zynaxis by marking the Notes "Paid in Full" and delivering them to Zynaxis.
Vaxcel shall thereupon deliver to each such Noteholder in exchange therefor a
certificate representing all the Note Shares to be issued in exchange therefor,
duly registered in the name of such holder, free and clear of any liens,
security interests or other defects of title.
(15) Each of the undersigned Noteholders agrees that: (i) upon
execution of the Note Exchange Agreement all rights that the Noteholder may have
to require the Zynaxis to register securities of the Zynaxis for sale under
applicable state and federal securities laws ("Registration Rights") are
suspended pending the Closing, and (ii) upon consummation of the Merger all such
Registration Rights will be terminated and such Noteholder will have such
registration rights as are provided for such Noteholder in the Agreement. If the
Agreement is terminated for any reason, beginning at the time of such
termination the undersigned Noteholder shall have such Registration Rights as
such Noteholder would have had at such time if such Registration Rights had not
been suspended pursuant to the preceding sentence.
(16) The Vaxcel Common Stock received by the Transferor Group for the
property transferred, together with shares of Vaxcel Capital Stock held by CytRx
prior to the Exchange, will represent one hundred percent (100%) of the
outstanding Vaxcel Capital Stock following the transaction.
REPRESENTATIONS
With your consent, we have also assumed that the following statements
are true on the date hereof and will be true on the date the proposed
transaction is consummated:
(1) The property being transferred by the Transferor Group to Vaxcel in
the Exchange consists of (i) the Senior Secured Credit Facility, (ii) the Cash
Payment, (iii) Zynaxis Capital Stock, and (iv) the Notes. Other than with
respect to any cash received by shareholders of Zynaxis Capital Stock pursuant
to Section 3.3 of the Agreement ("Dissenters' Rights") or cash received in lieu
of fractional shares of Vaxcel Common
<PAGE> 9
December 30, 1996
Page 9
Stock, there is no consideration being issued to any Transferor in exchange for
such property other than Vaxcel Common Stock or warrants for Vaxcel Common
Stock.
(2) No accounts receivable, commissions due, patents, patent
applications, copyrights, technical know-how, or licenses (other than
third-party licenses as to which all rights will be transferred) will be
transferred to Vaxcel in the Exchange, except as provided in the Technology
Development Agreement.
(3) No Vaxcel Common Stock or warrants for Vaxcel Common Stock will be
issued for services rendered to or for the benefit of Vaxcel, Vaxcel Merger Sub
or Zynaxis in connection with the Exchange.
(4) No Vaxcel Common Stock or warrants for Vaxcel Common Stock will be
issued in the Exchange for any indebtedness of Vaxcel or for interest on
indebtedness of Vaxcel.
(5) Aside from the indebtedness which has arisen in the ordinary course
of business, there is no indebtedness between any Transferor and Vaxcel, and
there will be no indebtedness created in favor of any Transferor as a result of
the Exchange.
(6) None of the assets to be transferred to Vaxcel will be received by
a Transferor as part of a plan of liquidation of another corporation.
(7) None of the Transferors will retain any rights or interest in the
property transferred to Vaxcel in the Exchange.
(8) The Exchange is not the result of the solicitation by a promoter,
broker, or investment banking house.
(9) The Exchange will occur pursuant to a plan agreed upon before the
consummation of the proposed transaction in which the rights of the parties are
defined.
(10) The Exchange will occur at approximately the same time.
(11) There is no plan or intention on the part of Vaxcel to redeem or
otherwise reacquire any of the Vaxcel Common Stock to be issued or issuable upon
the exercise of any warrants issued in the Exchange.
(12) As of the date of the Exchange, the Transferors have no plan or
intention to sell or otherwise dispose of an amount of the Vaxcel Common Stock
or warrants for Vaxcel Common Stock received by them in the Exchange that would
cause the
<PAGE> 10
December 30, 1996
Page 10
Transferors to not be in "control" of Vaxcel. For purposes of this Tax Opinion,
"control" means ownership of stock possessing at least 80% of the total combined
voting power of all classes of stock entitled to vote and at least 80% of the
total number of shares of all other classes of stock.
(13) Other than as set forth in the Agreements, Vaxcel has no plan or
intention to issue any additional shares of Vaxcel Common Stock or options or
rights to acquire Vaxcel Common Stock, except shares of Vaxcel Common Stock
issued pursuant to the exercise of warrants issued in the Exchange.
(14) Taking into account any issuance of additional shares of Vaxcel
Capital Stock; any issuance of Vaxcel Capital Stock for services; the exercise
of stock rights, warrants, or subscriptions for Vaxcel Capital Stock; a public
offering of Vaxcel Capital Stock; and the sale, exchange, transfer by gift or
other disposition of any of the Vaxcel Common Stock to be received in the
Exchange, the Transferor Group will be in control of Vaxcel immediately after
the Exchange.
(15) The fair market value of the Vaxcel Common Stock or warrants for
Vaxcel Common Stock, or both, to be received by each Transferor will, in each
instance, be approximately equal to the fair market value of the property (less
any liabilities assumed or any liabilities to which the transferred property is
taken subject to) surrendered by such Transferor in exchange therefor.
(16) Vaxcel will remain in existence and use the property transferred
to it in the Exchange in a trade or business. There is no plan or intention to
liquidate Vaxcel.
(17) As of the consummation of the Exchange, Vaxcel has no plan or
intention to dispose of any of the property transferred to it in the Exchange,
other than in the normal course of business operations.
(18) Each of the parties to the Exchange will pay its own expenses, if
any, incurred in connection with the proposed transaction (except as provided in
Article 11.2 of the Agreement).
(19) Vaxcel is not now an investment company and will not become an
investment company as a result of the Exchange. For purposes of the foregoing,
an "investment company" is a corporation that is a regulated investment company,
a real estate investment trust, or a corporation more than eighty percent (80%)
of the value of whose assets (excluding cash and nonconvertible debt
obligations) are held for investment and are readily marketable stocks or
securities, or interests in regulated investment companies or real estate
investment trusts. In making this determination, stock and
<PAGE> 11
December 30, 1996
Page 11
securities held by a parent corporation in subsidiary corporations shall be
disregarded and the parent corporation will be deemed to own its ratable share
of its subsidiaries' assets. A corporation will be considered a subsidiary if
the parent owns fifty percent (50%) or more of (i) the combined voting power of
all classes of stock entitled to vote, or (ii) the total value of shares of all
classes of stock outstanding.
(20) No Transferor is under the jurisdiction of a court in a case under
Title 11 of the United States Code or a receivership, foreclosure or similar
proceeding in a federal or state court, and none of the Vaxcel Common Stock or
the warrants for Vaxcel Common Stock, or both, received by each Transferor in
the Exchange will be used to satisfy the indebtedness of any debtor.
(21) Vaxcel will not be a "personal service corporation" within the
meaning of Section 269A of the Code. For this purpose, "personal service
corporation" means a corporation the principal activity of which is the
performance of personal services and such services are substantially performed
by employee-owners (i.e., employees who actually or constructively own on any
day of the taxable year more than 10% of the outstanding stock such
corporation).
(22) The adjusted basis and the fair market value of the property to be
transferred by each Transferor will, in each instance, be equal to or exceed the
sum of such Transferor's liabilities, if any, to be assumed by Vaxcel and to
which the transferred property is subject.
(23) The liabilities, if any, of each Transferor to be assumed by
Vaxcel were incurred in the ordinary course of business and are associated with
the property to be transferred.
(24) Compensation, if any, paid to the former employee-shareholders of
Zynaxis who continue as employees of Zynaxis or Vaxcel (i) will be for services
actually rendered, (ii) will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services, and (iii) will not represent
consideration for (i) Zynaxis Capital Stock, (ii) warrants for Zynaxis Capital
Stock, or (iii) Notes surrendered in the Zynaxis Exchange or Noteholder
Exchange.
(25) The fair market value of the property transferred by CytRx to
Vaxcel in the Exchange is equal to, or in excess of, ten percent (10%) of the
fair market value of the stock and securities of Vaxcel already owned by CytRx.
(26) The Agreements represent the entire understanding of the parties
to the Exchange with respect to the Exchange.
<PAGE> 12
December 30, 1996
Page 12
(27) The transactions relating to the Exchange are being undertaken for
bona fide business purposes, are based on arms-length negotiation, and are not
being undertaken and are not expected to have a tax avoidance purpose or affect.
OPINIONS
Based solely on the information submitted and the representations set
forth above, we are of the opinion that for federal income tax purposes:
(1) Except as provided below, no gain or loss will be recognized to
CytRx, the Zynaxis Shareholders, or the Noteholders upon the transfer of
property to Vaxcel solely in exchange for Vaxcel Common Stock. Sections 351(a).
Income or gain realized on the transfer of property in exchange for warrants for
Vaxcel Common Stock, if any, will be recognized, but not in excess of the fair
market value of the warrants received.
(2) No gain or loss will be recognized to Vaxcel upon its receipt of
property solely in exchange for Vaxcel Common Stock. Section 1032(a).
(3) The basis of the Vaxcel Common Stock to be received by each
Transferor will be the same as the basis of the property exchanged therefor,
plus any gain recognized by such Transferor on the exchange and less the basis
allocated to any fractional share of Vaxcel Common Stock settled by cash
payment. Section 358.
(4) The basis to Vaxcel of the property to be received in the exchange
will be the same as the basis of such property in the hands of the Transferor
immediately prior to the exchange, increased by the amount of gain recognized by
such Transferor as a result of the exchange. Section 362(a)(1).
(5) The holding period of the Vaxcel Common Stock to be received by
each Transferor will include the holding period of the property exchanged
therefor, provided that such property is held as a capital asset on the date of
the exchange or as property described in Section 1231. Section 1223(1).
(6) The holding period of the property to be received by Vaxcel in the
exchange will, in each instance, include the period during which such property
was held by the Transferor. Section 1223(2).
(7) The payment of cash in lieu of fractional shares of Vaxcel Common
Stock will be treated as if the fractional shares were issued as part of the
exchange and then redeemed by Vaxcel. These cash payments will be treated as
having been received as
<PAGE> 13
December 30, 1996
Page 13
distributions in full payment in exchange for the fractional shares of Vaxcel
Common Stock as provided in Section 302(a). Generally, any gain or loss
recognized upon such exchange will be capital gain or loss, provided the
fractional share would constitute a capital asset in the hands of the exchanging
shareholder.
(8) Where solely cash is received by a Transferor in exchange for its
shares of Zynaxis Capital Stock pursuant to the exercise of Dissenters' Rights,
such cash will be treated as having been received in redemption of its shares of
Zynaxis Capital Stock, subject to the provisions and limitations of Section 302
of the Code.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined, the additional information that we have obtained, and the
statements set out herein, which we have assumed are true on the date hereof and
will be true on the date on which the proposed transaction is consummated. Our
opinions cannot be relied upon if any of the facts contained in such documents
or if such additional information is, or later becomes, inaccurate, or if any of
the statements set out herein is, or later becomes, inaccurate. Our opinions are
limited to the tax matters specifically covered thereby, and we have not been
asked to address, nor have we addressed, any other tax consequences of the
proposed transactions, including, but not limited to, adjustments that may be
determined to be necessary by reason of a change in method of accounting, any
possible recognition of deferred inter-company gain, the recovery of tax benefit
items (under Section 111 or otherwise), any recapture of investment tax credits,
the application of the assignment of income doctrine (and similar principles),
the conversion of Zynaxis Options, the exchange of warrants for Zynaxis Common
Stock for either New Warrants or Non-Financing Warrants, the receipt by CytRx of
a warrant for shares of Vaxcel Common Stock, and any limitations on the use of
Zynaxis' net operating losses.
<PAGE> 14
December 30, 1996
Page 14
This opinion is being provided solely for the benefit of CytRx, Vaxcel,
the Zynaxis Shareholders, and the Noteholders. No other person or party shall be
entitled to rely on this opinion.
Very truly yours,
ALSTON & BIRD
By:
---------------------------------
Philip C. Cook
<PAGE> 1
EXHIBIT 10.1
AGREEMENT OF SUBLEASE
This Agreement made and entered into this 18th day of January 1996 by
and between Vaxcel, Inc. (hereinafter called "Sublandlord"), with principal
offices for purposes hereof being its offices at 154 Technology Parkway,
Norcross, Georgia 30092 and SeaLite Sciences, Inc., a Georgia Corporation
(hereinafter called "Subtenant"), with principal offices at the premises to be
sublet hereunder in that certain building known as Suite 200 located at 3000
Northwoods Parkway, Norcross, Georgia 30071 (the "Building").
WITNESSETH:
Whereas, Sublandlord has a right to occupy approximately 6,282 rentable
square feet in the Building under the terms of a lease dated as of November 23,
1993 and amendment dated as of January 23, 1996 (hereinafter referred to as the
"Main Lease"), between New England Mutual Life Insurance Company (hereinafter
called "Landlord"), as landlord, and, Vaxcel, Inc. as tenant, an original copy
of which has heretofore been delivered to Subtenant and is deemed incorporated
herein by reference though not physically attached.
Whereas, Sublandlord desires to sublease approximately 6,282 rentable
square feet of the premises under lease to Sublandlord, and Sublandlord has
assented to let the same to Subtenant for the term and on the conditions
hereinafter set forth.
Now, therefore, in consideration of the recitals above which are deemed
a contractual part hereof and the mutual covenants and obligations herein set
forth, the parties hereto for themselves, their permitted successors and
assigns, do hereby agree as follows:
1. Subleased Premises. Sublandlord hereby subleases to Subtenant the
premises under lease to Sublandlord containing approximately 6,282 rentable
square feet in the Building (the "Subleased Premises"), more particularly
designated and described in Exhibit "A" attached and incorporated as a part
hereof, for the term hereinafter stated and the rent herein reserved.
Subtenant hereby agrees that Subtenant shall expand into approximately 900
square feet of warehouse space (marked as "WAREHOUSE" on Exhibit "A") in
accordance with the terms and conditions of the Main Lease should said warehouse
space become available on or before March 23, 1996. Sublease rates for said
space shall be consistent with the rate per square foot used to calculate the
Base Rent in Section 3 of this Agreement. Sublandlord agrees to pass along to
Subtenant monies received from Landlord for Tenant Improvements to said space.
2. Term of Sublease. The term of the sublease created by this Agreement
of Sublease shall commence on January 23, 1996 and shall expire on January 1,
1999.
<PAGE> 2
3. Covenant to Pay Rent. In consideration of the sublease granted by
this Agreement of Sublease and as rent for the Subleased Premises, Subtenant has
agreed to pay Sublandlord a Base Rent (as defined in the Main Lease) as follows:
The sum of $3,962.90 per month (based on a rate of $7.57 per
square foot) payable in advance on the commencement date of
this sublease and on the 23rd calendar day of each successive
month thereafter until January 23, 1997 when the Base Rent
shall increase to $4,119.95 per month (based on a rate of
$7.87 per square foot) which shall remain in effect until
January 23, 1998 when the Base Rent shall increase to $4287.47
per month (based on a rate of $8.19 per square foot).
Such rental shall be payable without prior written notice or demand,
shall be equitably prorated for any partial calendar month of the sublease term,
and shall be paid to Sublandlord at its address as set forth above, or at such
other place as Sublandlord may designate, in lawful money of the United States
of America, without any deduction, set-off, or reduction.
It is the intention of the parties that the sub-rent paid to the
Sublandlord by Subtenant shall be net of all expense under the Main Lease and
that the Sublandlord's only continuing expense shall be the lease brokerage
commission as provided in Section 12 of this Agreement not withstanding
Sublandlord's responsibility to Landlord pursuant to the Main Lease and
amendment thereto. All other rent due under the Main Lease such as Additional
Rent for operating expenses, taxes, and capital costs referred to in Section 3.2
of the Main Lease shall be the responsibility of the Subtenant but shall be paid
to Sublandlord.
4. Security Deposit. Sublandlord hereby acknowledges the receipt of the
sum of $4,000 as a security deposit for the full and faithful performance of
each and every provision of this Agreement of Sublease to be performed by
Subtenant. If Subtenant shall fully and faithfully perform the provisions of
this Agreement of Sublease to be performed by it, such security deposit shall be
returned to Subtenant within 30 days after the expiration of the term of this
sublease. It is acknowledged by the parties hereto that Sublandlord shall not be
required to keep such security deposit separate from other of its operating
funds, and Subtenant shall not be entitled to any interest thereon.
The Security Deposit per Section 11.17 of the Main Lease is by and between the
Sublandlord and the Landlord and cannot be passed along to the Subtenant.
5. Nontransfer of Rights
(a) Subtenant shall not assign, mortgage, pledge,
encumber or in any manner transfer this sublease or
any part thereof, nor sublet or suffer the Subleased
Premises or any part thereof to be used by
- 2 -
<PAGE> 3
other without the prior written consent of Landlord
and Sublandlord. Such consent shall not be
unreasonably withheld.
(b) This subletting shall not be construed to grant
Subtenant any right afforded Sublandlord under Part
III of the Main Lease to renew or extend its term.
Sublandlord will assist Subtenant in getting the
landlord's consent to the extension term or
otherwise. Such extension will be directly between
the subtenant and the Landlord.
(c) This subletting shall also not be construed to grant
Subtenant any right afforded Sublandlord under the
Main Lease to terminate the Main Lease prior to its
expiration or any rights to Sublandlord's Security
Deposit posted under the Main Lease.
6. Relationship to Main Lease. The parties agree to the
following:
(a) Obligation under the Main Lease. Subtenant
acknowledges that it has carefully examined the Main
Lease and undertakes, assumes and agrees to timely
observe, carry out, perform and discharge in full all
terms and provisions under the Main Lease as to the
Subleased Premises, the Building and the common areas
required to be performed by Sublandlord, except as
otherwise as expressly altered herein.
(b) Subordination to Main Lease. Subtenant hereby agrees
that (i) this Agreement of Sublease is and shall
remain in all respects subject and subordinate to the
provisions of the Main Lease and the terms therein
contained and the circumstances therein contemplated
which may in the future affect its application; (ii)
Subtenant shall occupy the Subleased Premises in
accordance with the terms of the Main Lease: (iii)
Subtenant shall maintain the Subleased Premises in
accordance with the provisions of the Main Lease as
though Subtenant were the original "Tenant"
thereunder in respect to the Subleased Premises; (iv)
Subtenant shall not do or cause to be done, or suffer
any act or omit to do any act which might result in
violation of or a default under any of the terms and
conditions of the Main Lease or which might render
Sublandlord liable for any charge, cost or expense of
any kind thereunder; (v) except as may be
inconsistent with the express term of this Agreement
of Sublease, all terms, covenants and conditions in
the Main Lease shall be applicable to this sublease
as if Sublandlord was the Landlord under the Main
Lease and Subtenant was the Tenant thereunder, and,
in the case of a breach hereunder, Sublandlord shall
have all the rights and remedies against the
Subtenant as would be available to the Landlord under
the Main Lease; (vi)
- 3 -
<PAGE> 4
Subtenant does hereby indemnify and agree to hold
Sublandlord and Landlord harmless of, from and
against any and all liability, loss, damage, suits,
penalties, claims, demands and judgments of every
kind or nature (including without being limited
thereto, reasonable attorneys fees and expenses of
defense by reason thereof) arising from the use or
occupancy of the Subleased Premises or of any
business conducted therein, or from any work or thing
whatsoever done or any conditions created by or any
act of omission of Subtenant, its employees, agents,
contractors, invitees, or licensees, in or about the
Subleased Premises, or any other part of the Building
of which it is a part; (vii) Subtenant undertakes to
comply with all reasonable rules and regulations
promulgated either by Landlord or Sublandlord
concerning the occupancy of the Subleased Premises
and use of the Common Areas; and (viii) Subtenant
shall not allow any liens to be placed against the
property.
(c) Termination of Main Lease. In the event of and upon
termination or cancellation of the Main Lease
pursuant to the terms and provisions thereof, this
sublease shall automatically cease and terminate.
Landlord and Sublandlord represent that the Main
Lease is in full force and no default known to
Sublandlord exists thereunder. Sublandlord undertakes
that during the term of this sublease it will fully
and faithfully perform the terms and conditions of
the Main Lease on its part to be performed thereunder
including payment of rent and additional rent. Should
the lease be terminated because of the Landlord's
default to its mortgagee, the Sublandlord shall have
no obligation or liability to the Subtenant. Should
the Landlord default under the Main Lease, costs of
curing such fault shall be born equally by
Sublandlord and Subtenant.
(d) Entry and Inspection. Sublandlord shall have the same
right to enter the Subleased Premises as provided the
Landlord by the provisions of the Main Lease.
(e) Undertakings of Landlord. Subtenant shall be entitled
to the services and repairs which Landlord is and may
be obliged to furnish or make to or in the Subleased
Premises pursuant to the terms of the Main Lease.
Sublandlord shall in no event be liable to Subtenant,
nor shall the obligations of Subtenant hereunder be
impaired, or the performance thereof excused, because
of any failure or delay on the part of Landlord in
furnishing such services or in making such repairs
unless such failure or delay results from Sublandlord
being in default under the Main Lease. If Landlord
shall default in any of the obligations to
Sublandlord with respect to
- 4 -
<PAGE> 5
the Subleased Premises, Subtenant shall be entitled
to participate with Sublandlord in the enforcement of
the rights of Sublandlord against Landlord. In this
connection, and solely and exclusively for such
purposes, the rights of Sublandlord under the Main
Lease are conferred upon Subtenant and Subtenant is
subrogated to such rights to the extent that
enforcement thereof is required in regard to the
Subleased Premises, except that any cost of
enforcement shall be borne exclusively by Subtenant.
7. Use of the Subleased Premises. Subtenant shall employ and occupy the
Subleased Premises for the research and development of diagnostic test kits,
luminescent research products and for other purposes permitted under the Main
Lease and for no other purpose. Subtenant agrees to comply with the provisions
of Section 7.7 of the Main Lease regarding Environmental Assurances. Solvents,
acids and bases normally used by Subtenant in the course of its business are
attached and incorporated as a part hereof as Exhibit "B". The volume of
individual organic solvents, acids and bases is to be stored in small volumes of
four liters or less.
8. Default by Subtenant. If Subtenant shall default in the performance
of any of the terms, covenants, conditions or agreements contained in this
Agreement of Sublease or shall violate or otherwise fail to comply with any of
the terms, covenants, and conditions of the Main Lease as undertaken herein by
Subtenant to all intents and purposes as if Subtenant were the original "Tenant"
thereunder as to the Subleased Premises, or shall file a petition under any
applicable bankruptcy laws or regulations, by being adjudicated a bankrupt of
insolvent or shall make any assignment for the benefit of creditors or have a
receiver or trustee appointed to take charge of its business operations (except
as limited by applicable provision of the Bankruptcy Code of 1978, as amended),
the Sublandlord shall be entitled (i) to invoke any or all of the remedies which
would be available to Landlord under the Main Lease in the event of a default by
Sublandlord under its provisions, and (ii) to pursue any other remedy at law or
in equity available to Sublandlord, provided, however, that no remedy may be
invoked or pursued in the case of an event of default in the performance of any
of the terms, conditions or agreements contained in this Agreement of Sublease
or the Main Lease (other than the payment of the rent, or any other charges to
be paid by Subtenant) unless such event of default shall continue uncured for a
period of ten (10) days after written notice specifying the default complained
of has been delivered by Sublandlord to Subtenant at the Premises or at its
address indicated above.
9. Repairs, Services and Insurance. The parties agree as follows:
(a) Repairs. Sublandlord shall not be obligated to make
repairs or provide any services or utilities
whatsoever in or to the Subleased Premises as it
relates to this Agreement between Sublandlord and
Subtenant.
- 5 -
<PAGE> 6
(b) Insurance. Subtenant shall at its own cost and
expense keep in force during the entire term of the
sublease created by this Agreement of Sublease
policies of insurance, including comprehensive
general liability insurance, in the amounts required
under the Main Lease and in which Sublandlord and
Landlord shall be included as additional named
insureds.
10. Condition and Care of Subleased Premises. Except as herein
provided, the Subleased Premises are received and accepted "as is" and in the
state and physical condition thereof on the date hereof. On Expiration Date or
on earlier termination as herein provided, Subtenant shall surrender the
Subleased Premises broom clean and in good repair and as required by Section
7.1(b) of the Main Lease. Subtenant shall not be entitled to own or remove
Sublandlord's personal property or trade fixtures referred to in Section 5.2(a)
of the Main Lease.
11. Condition Precedent to Operation of Sublease. The obligations of
Sublandlord and Subtenant under this Agreement of Sublease are subject as a
condition precedent to prior written approval and ratification by Landlord, as
evidenced by its signature below.
12. Brokerage. Subtenant represents and warrants that it has been
represented by Wm. Leonard & Co. Sublandlord has been represented by Cushman &
Wakefield of Georgia, Inc. Commissions to these firms shall be paid in
accordance with a separate agreement between the parties and shall be paid by
Sublandlord and Subtenant.
13. Holdover. If Subtenant holds over in occupancy of the Premises
after the expiration of the Term, Subtenant shall at the election of Sublandlord
become a subtenant at sufferance subject to the terms and conditions herein
specified, so far as applicable. Subtenant shall pay rent during the holdover
period, at a base rental rate equal to twice the Base Rent in effect at the end
of the Term, plus the amount of Subtenant's Share of Expenses then in effect and
all other costs payable by Subtenant under this Sublease. Subtenant shall also
be liable for all damages sustained by Sublandlord and Landlord on account of
such holding over.
14. Subtenant Improvements. Subtenant shall comply with Article V of
the Main Lease in making any alterations, additions, installations, substitutes
or improvements ("Alterations") in and to the Premises. Subtenant shall not make
any Alterations without fast obtaining Landlord's written consent. Sublandlord
agrees to credit Subtenant with Landlord's allowance for improvements to the
expansion space as provided in Article AP7 of the Main Lease. Subtenant agrees
to reimburse Sublandlord the sum of $2,444 representing its share of the cost of
installing additional doors in the rear of the Premises.
Such payment shall be made upon completion of the work.
15. Miscellaneous. This Agreement of Sublease contains the entire
agreement of the parties in respect to the transactions contemplated hereby,
supersedes all prior
- 6 -
<PAGE> 7
agreements or understandings, and may not be altered or modified in any way
unless such change or modification is in writing and signed by the party to be
bound. The headings of paragraphs of this Agreement of Sublease are for
convenience only and are not intended to be used in construing the intentions of
the parties. Each covenant and agreement in this sublease is intended to be and
shall be construed as separate and independent. Time is of the essence of the
provisions contained in this Agreement of Sublease, and if any provisions or
part thereof shall to any extent be invalid, the application of such provision
or part thereof, other than that which is so invalid, shall remain unaffected
and fully enforceable.
16. Jurisdiction. This Sublease shall be construed, governed and
enforced according to the laws of the state of Georgia.
In witness whereof, Sublandlord and Subtenant have each executed and
delivered this Agreement of Sublease in quadruplicate, each being deemed an
original copy, as of the day and year first above written.
SUBLANDLORD
VAXCEL, INC.
By:__________________
Title:________________
SUBTENANT:
SEALITE SCIENCES, INC.
By:___________________
By:__________________
Secretary
[Affix corporate seal]
- 7 -
<PAGE> 8
CONSENT OF LANDLORD
The undersigned, Regency Holdings, Inc., a Georgia corporation, the Landlord
under the Lease Agreement attached hereto as Exhibit "A", pursuant to the
provisions of said Lease Agreement, does hereby provide evidence and confirm its
approval of the Sublease of said Lease from Vaxcel, Inc. (hereinafter referred
to as "Sublandlord") to SeaLite Sciences, Inc. (hereinafter referred to as
"Subtenant") under the following conditions:
1. This consent shall apply to the primary term of the Lease Agreement.
2. This consent shall not relieve Sublandlord of any liability under said Lease,
shall not affect the terms and conditions of the Lease, nor shall this consent
be deemed a waiver by the undersigned of Sublandlord's obligation to obtain the
Landlord's consent as to any subsequent transfer of said Lease.
3. Landlord, in granting this consent, shall under no circumstances be held
liable for the payment of any brokerage commissions earned as a result of the
subletting of the premises. Sublandlord agrees to indemnify Landlord from any
and all losses and expenses, including reasonable attorneys fees, resulting from
such a commission suit or action filed against Landlord.
LANDLORD:
Regency Holdings, Inc.
a Georgia corporation
By: Chatham Road, L.L.C.
a Georgia limited liability company,
Authorized Agent
By:
-------------------
Norman Harrower III
Manager
Date:
------------------
- 8 -
<PAGE> 9
EXHIBIT "A"
PREMISES
[Diagram]
- 9 -
<PAGE> 10
Exhibit "B"
<TABLE>
<CAPTION>
NAME CAS#
<C> <C>
Folin and Ciocalteu's Phenol Reagent
1,2 - Dichloroethane 107-06-2
Diethanolamine 11-42-2
Ethylenediamine 107-15-3
sec-Butanol 78-92-2
Ethylene Glycol 107-21-1
Borane-pyridine complex 110-51-0
Solium Methoxide 124-41-4
Isobutyl Chloroformate 543-27-1
Formamide 75-12-7
Ethanolamine 141-43-5
Acetic Anhydride 108-24-7
Tetrahydrofuran 109-99-9
Formaldehyde Solution 50-00-0
Activated Carbon 64365-11-3
1 Propanol 71-23-8
Acetone (Optima) 67-64-1
Phenol 108-95-2
EthylAcetate 141-78-6
2-Propanol 67-66-0
Chloroform 67-66-3
Toluene (Optima) 108-88-3
Ethyl Alcohol 64-17-6
Methanol 67-56-1
Reagent Alcohol
Pyridine 110-86-1
Sulfuric Acid 7664-93-9
Hydrochloric Acid 7647-01-1
Acetic Acid, Glacial 64-19-7
0-Phosphoric Acid 85% 7664-38-2
Formic Acid 64-18-6
Ammonium Hydroxide 1336-21-6
Nitric Acid 7697-37-2
Uranylacetate Dihydrate 541-09-3
</TABLE>
- 10 -
<PAGE> 1
EXHIBIT 10.2
AMENDMENT TO SUBLEASE
THIS FIRST AMENDMENT TO SUBLEASE (the "Amendment"), made and entered
into as of the 15th day of October, 1996, by and between VAXCEL, INC.
("Sublandlord") and SEALITE SCIENCES, INC. ("Subtenant");
WITNESSETH:
WHEREAS, Sublandlord has a right to occupy approximately 7,253 rentable
square feet in the building known as Suite 200 located at 3000 Northwoods
Parkway, Norcross, Georgia 30071 (the "Building"), under the terms of a lease
dated as of November 23, 1993, as amended on January 23, 1996 and October 10,
1996 (hereinafter collectively referred to as the "Main Lease"); and
WHEREAS, Sublandlord and Subtenant entered into that certain Sublease
dated January 18, 1996 (the "Sublease") for approximately 6,262 rentable square
feet in the Building; and
WHEREAS, Sublandlord and Subtenant desire to amend certain terms and
conditions of the Sublease;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged, the Sublease is hereby amended and
the parties hereto do hereby agree as follows:
1. The Premises of the Sublease is hereby expanded to include 971 square feet of
warehouse space shown on Exhibit A as Suite 210. Rental commencement shall begin
on the earlier of November 1, 1996 or occupancy.
2. Base Rent for the expansion shall be $5.00 per square foot per annum,
increasing at 3% per year.
3. Subtenant acknowledges that it has carefully examined the Main Lease
(including the amendment dated October 10, 1996) and undertakes, assumes and
agrees to timely observe, carry out, perform and discharge in full all terms and
provisions under the Main Lease as to the Subleased Premises, the Building and
the common areas required to be performed by Sublandlord, except as otherwise
expressly altered herein or in the Sublease.
Except as expressly amended hereby, the Sublease shall otherwise remain
in full force and effect as originally executed.
This Amendment shall bind and inure to the benefit of the parties
hereto, their respective heirs, executors, administrators and assigns.
IN WITNESS WHEREOF, the Sublandlord and Subtenant have signed, sealed
and delivered this Agreement on the day, month, and year first above written.
SUBLANDLORD
VAXCEL, INC.
By: /s/ Paul J. Wilson
--------------------------------
Title: President
----------------------------
SUBTENANT
SEALITE SCIENCES, INC.
By: /s/ Douglass S. Ross
--------------------------------
Title: Secretary
----------------------------
<PAGE> 1
EXHIBIT 10.3
AMENDED AND RESTATED LICENSE AGREEMENT
(OPTIVAX(R))
THIS LICENSE AGREEMENT (this "Agreement") is made and executed as of
October 10, 1996, by and between CYTRX CORPORATION, a Delaware corporation
("CytRx"), and VAXCEL, INC., a Delaware corporation ("Vaxcel").
RECITALS
WHEREAS, CytRx owns certain patents, patent applications, technology
and other rights related to a certain copolymer and its use as a vaccine
adjuvant;
WHEREAS, Vaxcel obtained the exclusive, worldwide license in and to
such rights, in accordance with the terms of a License Agreement dated as of
January 1, 1993 (the "Original Agreement"), and amended as of February 1, 1994,
December 30, 1994, and August 10, 1995, to develop and commercially exploit such
patents, patent applications, technology and other rights in the Field (as
defined below); and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, CytRx and Vaxcel hereby agree to amend and restate the
Original Agreement, as amended, as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms not otherwise defined herein shall
have the meanings set forth below.
"Affiliate," "affiliate" or any variation thereof means, when used with
reference to a specified person, any person or entity directly or indirectly
controlling, controlled by or under common control with the specified person.
For purposes of this Agreement, the direct or indirect ownership of over 50% of
the outstanding voting securities of an entity, or the right to receive over 50%
of the profits or earnings of an entity, or the right to control the policy
decisions of a person or entity, shall be deemed to constitute control.
"Block Copolymer Patent Rights" means CytRx's rights in all information
or discoveries covered by patents and patent applications listed on Exhibit A
hereto, and all patents issuing upon such applications, and all continuations,
continuations-in-part, additions, divisions, renewals, extensions,
reexaminations and reissues of any of the foregoing.
<PAGE> 2
"Copolymer" means a certain series of 12,000 kd molecular weight
polyoxyethylene / polyoxypropylene copolymers, as more specifically described on
Exhibit B, and covered by the claims in the Patent Rights.
"Effective Date" means the date specified in the introduction to the
Original Agreement.
"Emory Agreement" means the License Agreement and Amendment dated as of
November 1, 1985, between Emory University and CytRx (formerly known as
SYNTHRx), as further amended on July 22, 1986, August 18, 1986 and January 9,
1992.
"Federal Government Interest" means the rights of the U.S. Government
arising under 35 U.S.C. Section 200 et seq. (which codifies Public Laws 96-517,
97-256 and 98-620) and any regulations issued thereunder, as such statute or
regulations may be amended from time to time hereafter.
"Field" means Regulated Use of the Copolymer or Products as Vaccine
Adjuvants in combination with an antigen in a Vaccine Delivery System (a) in
human animals, and (b) solely for the purpose of conducting research or
preclinical trials by Vaxcel and its Technology partners in non-human animals in
order to predict safety and efficacy in human animals (this arrangement would be
covered under a Materials Transfer, Option, or Sublicense Agreement between
Vaxcel and a third party). The term "Field" excludes any other use of the
Copolymer and Products alone or in combination with any other active ingredient
and specifically excludes, without limitation, (1) the use of the Copolymer and
Products for the delivery and/or protection of genes, oligonucleotides or
therapeutic agents for any in vivo, ex vivo, or in vitro purposes, (2) the use
of the Copolymer and Products alone as non-specific immune stimulants, and (3)
the use of the Copolymer and Products as therapeutic agents to treat infectious
diseases. Notwithstanding clause (2) of the preceding sentence, the Copolymer
may be used (and the term "Field" shall include Regulated Use of the Copolymer)
alone as a prophylactic, non-specific immune stimulant in human animals.
"FDA" means the U.S. Food and Drug Administration or any successor
agency thereto.
"Improvement" means any and all new or useful processes, manufacturing
methods, compositions of matter or methods of use first conceived, reduced to
practice or developed after the Effective Date and during the term of this
Agreement which relate to the manufacture or use of Products and which apply to
the Field.
"Net Sales" as applied to a Product shall mean the gross sales of such
Product by Vaxcel or any Affiliate thereof to an unaffiliated third party, less:
transportation charges to the extent separately identified on the invoice and
included in the gross sales; returns and allowances actually paid or allowed by
Vaxcel; customary discounts (whether in cash or trade); and sales and similar
taxes based on sales prices to the extent included in gross sales, but not
including taxes assessed on income derived from such sales.
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"Patent Rights" means the Vaccine Patent Rights and the Block Copolymer
Patent Rights.
"Product" or "Products" means the Copolymer and any product containing,
incorporating, based upon or otherwise using the Copolymer or the Technology in
the Field.
"Product Information" means all technical, scientific, business
development and marketing data and information owned or possessed by CytRx on or
before the Effective Date relating to the Copolymer or the Products in the
Field, including (i) all information relating to indications for use and
conditions of the Copolymer in the Field, (ii) the specifications for the
Copolymer, (iii) licensing and similar contacts, and (iv) all other methods,
processes, know-how and trade secrets, whether or not patented or patentable,
which CytRx owns or possesses (to the extent CytRx can furnish such information
without violating any obligation of confidentiality to a third party) on the
Effective Date and which relate to the Copolymer or Products in the Field and
may be useful in the manufacturing, marketing or sale of Products in the Field.
"Regulated Use" means the development, manufacture and sale of any
Product that, at the time Vaxcel begins its development efforts, is subject to
regulations by the FDA (if conducted in the United States), other regulatory
agencies around the world (if conducted outside the United States), or any
successor agencies.
"Technology" means the Patent Rights and the Product Information.
"Vaccine Adjuvant" means the Copolymer or any Product which
specifically enhances the body's immune response to one or more specific
antigen(s) in a vaccine.
"Vaccine Delivery System" means any emulsion or formulation containing
the Copolymer in combination with an antigen, which is intended to elicit an
immune response that is specific for the antigen. The emulsion or formulation
may deliver the combination either immediately or over a period of time, through
any route of administration including, without limitation, an oral, nasal or
pulmonary method or use.
"Vaccine Patent Rights" means CytRx's rights in all information or
discoveries covered by patents and patent applications listed on Exhibit C
hereto, and all patents issuing upon such applications, and all continuations,
continuations-in-part, additions, divisions, renewals, extensions,
reexaminations and reissues of any of the foregoing.
"Valid Claim" means a claim included in an issued patent that has not
expired or been held invalid or unenforceable by a court of competent
jurisdiction in a final and nonappealable or non-appealed judgment or a claim
included in a patent application.
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ARTICLE II
GRANT OF LICENSE TO VAXCEL;
TRANSFER OF PRODUCT INFORMATION
2.1 License. Subject to the terms and conditions herein, CytRx hereby
grants to Vaxcel a worldwide, royalty-bearing right and license in and to the
Technology to make, have made, use, modify, further develop, improve, market,
sell and otherwise commercially exploit the Products in the Field, and to
practice under the Patents and to use the Product Information in the Field in
connection therewith. The license shall be exclusive, even as to CytRx, subject
to the Federal Government Interest. Vaxcel shall have the right to sublicense
its rights hereunder to the extent consistent with the terms of this Agreement,
including Section 2.4 hereof. Vaxcel shall not have the right to make or have
made the Copolymer but shall have the right to have the Copolymer made on its
behalf by CytRx, in accordance with Section 4.6 hereof.
2.2 Transfer of Product Information. Promptly following the Effective
Date, CytRx shall use all reasonable efforts to make available to Vaxcel a copy
of all Product Information owned or possessed by CytRx on the Effective Date.
2.3 Improvements.
(a) Any and all Improvements made, discovered, developed or
acquired by Vaxcel in the Field ("Vaxcel Improvements") during the term of this
Agreement shall belong to Vaxcel, and Vaxcel shall have exclusive right, title
and interest thereto and shall have no obligation to disclose to CytRx such
Improvements or to permit CytRx to make use of such Improvements. All Vaxcel
Improvements in the Field shall be transferred to CytRx, without charge, upon
termination of this Agreement (except in the case of termination pursuant to
Section 6.1 or because of breach by CytRx pursuant to Section 6.3).
(b) Vaxcel shall promptly notify CytRx, in writing, of any
Improvement outside the Field. All Improvements made, discovered, developed or
acquired by Vaxcel outside the Field during the term of this Agreement shall
belong to Vaxcel, but CytRx shall have the right to license any such Improvement
on an exclusive, worldwide basis, on terms no less favorable to CytRx than the
terms of this Agreement. CytRx's right of first refusal shall terminate 180 days
after Vaxcel has fully disclosed the Improvement and all corresponding data to
CytRx in writing, but in no event may Vaxcel subsequently license the
Improvement to any person on terms less favorable than those offered to CytRx,
without first allowing CytRx the opportunity to license the Improvement on the
more favorable terms.
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2.4 Sublicensing of Technology. The right of Vaxcel to grant
sublicenses to third parties under Section 2.1 hereof is subject to the
following conditions:
(a) Vaxcel shall forward to CytRx, within thirty (30) days
after execution of a sublicense, option, or similar agreement, a complete and
accurate written copy of each executed agreement hereunder;
(b) In each such sublicense, the sublicensee shall acknowledge
that it is subject to all of Vaxcel's duties and obligations contained in this
Agreement;
(c) Notwithstanding any sublicense to the contrary, Vaxcel
shall remain responsible to CytRx for all of Vaxcel's and its Sublicensees'
duties and obligations contained in this Agreement;
(d) Upon the occurrence of an Event of Default under Section
6.2(a), all payments then or thereafter due and owing to Vaxcel from any of its
sublicensees shall upon notice from CytRx to any such sublicensee become payable
directly to CytRx by such sublicensee for the account of Vaxcel; provided,
however, that CytRx shall remit to Vaxcel the amount by which such payments
exceed the amounts owed by Vaxcel to CytRx under this Agreement or otherwise,
less any costs of collection plus interest for late payment per Section 3.7 (if
any); and
(e) Each sublicense shall provide for its assignment to CytRx,
at the option of CytRx, in the event of termination of this Agreement for any
reason (other than termination pursuant to Section 6.1 or because of breach by
CytRx pursuant to Section 6.3).
ARTICLE III
ROYALTIES, ETC.
3.1 Royalties. In consideration of the licenses granted under Article
II, Vaxcel shall pay a royalty to CytRx on every direct sale of the Product by
Vaxcel or its Affiliates in any country for the longer of (a) ten years from the
first commercial sale of the Product in that country, or (b) for so long as the
manufacture or sale of the Product is subject to a Valid Claim in such country.
The royalty shall be equal to ten percent (10%) of the Net Sales of such
Product. A sale of a Product shall be deemed to occur upon the earlier of (i)
shipment of a Product by Vaxcel or its Affiliates to an unaffiliated party, or
(ii) transfer of title to the Product to the buyer.
3.2 Sublicense Compensation. If Vaxcel sublicenses any or all of its
rights hereunder to an unaffiliated third party, Vaxcel shall pay to CytRx a
royalty of fifteen percent (15%) of all compensation received by Vaxcel from the
sublicensee, whether denominated as license fees, milestone payments, approval
fees, royalty income or otherwise. Furthermore, any compensation above Vaxcel's
fully allocated cost of either
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chemical sales or R&D revenue received by Vaxcel will be considered sublicense
compensation for the purposes of calculating the CytRx payment. Notwithstanding
the foregoing, however, sublicense compensation shall not include government
grants or purchases of Vaxcel equity by an unaffiliated third party.
3.3 Third Party Royalties. CytRx shall be responsible for any royalties
payable as a result of this Agreement, if any, pursuant to the Emory Agreement,
any royalties payable to BASF, if any, pursuant to an Agreement dated as of May
22, 1986, as such may be amended, between CytRx and BASF Corporation (the "BASF
Agreement"). Vaxcel shall be responsible for any other royalties or similar
payments owed to third parties as a result of Vaxcel's commercialization of
Products under this Agreement.
3.4 Payment of Royalties. Royalties payable to CytRx under Section 3.1
or 3.2 shall be due for each calendar quarter beginning with the first calendar
quarter in which a sale of any Product occurs or sublicense cash compensation is
received from any third party and shall be payable to CytRx within thirty (30)
days following the last day of the applicable calendar quarter.
3.5 Reports. Vaxcel shall deliver to CytRx within thirty (30) days
after the end of each calendar quarter a report, certified by the chief
financial officer of Vaxcel, setting forth in reasonable detail the calculation
of the royalties payable to CytRx for such calendar quarter, including the Net
Sales on a Product-by-Product and country-by-country basis, and all royalty
income received from sublicensees of Vaxcel.
3.6 Currency and Place of Payment.
(a) All payments to CytRx under this Agreement shall be made
by wire transfer in immediately available funds in legal currency of the United
States and shall be delivered to CytRx at the account designated in writing by
CytRx from time to time.
(b) With respect to sales of Products made in a currency other
than United States dollars, royalties shall be computed based upon the same
conversion rate of the currencies of sales into United States dollars as is
published in The Wall Street Journal (Eastern Edition) as of the last business
day of the calendar quarter included in the report.
(c) In the event that Vaxcel is prevented from making any
royalty payment under this Agreement by virtue of restrictions on currency
conversion or repatriation under the statutes, laws, codes or governmental
regulations of the country from which the payment is to be made, then such
royalty payments may be paid by depositing them in the currency in which accrued
to CytRx's account in a bank acceptable to CytRx in the country whose currency
is involved. If the local currency can not be converted or remitted to CytRx
within twelve (12) months from the initial deposit, Vaxcel shall pay CytRx the
equivalent of such amount (including any interest earnings) in United
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States dollars, and the local currency shall be transferred to an account in a
bank acceptable to Vaxcel in that country.
3.7 Late Payment. Payments hereunder shall be deemed paid as of the day
on which they are received at the account designated pursuant to Section 3.6.
Any part of a royalty which is not paid on or before the date when due shall
accrue interest thereon from such date until the date of its payment in full at
three (3) percentage points over the per annum interest rate published as the
"Prime Rate" in The Wall Street Journal (Eastern Edition), but in no event shall
such rate exceed the maximum rate permitted by applicable law.
3.8 Records. Vaxcel agrees to maintain for five (5) years after the
submission of each report under Section 3.5 hereof full and accurate books and
records in sufficient detail to enable the royalties payable hereunder to be
verified, and to require any Affiliate or sublicensee to do the same. Upon
reasonable prior notice to Vaxcel, CytRx and its certified public accountants
shall have access to the books and records of Vaxcel to conduct a review or
audit thereof. Such access shall be available not more than once each calendar
year, during normal business hours, during the term of this Agreement and for a
period of three (3) years after its expiration or termination.
3.9 No Set-Offs or Counterclaims. Under no circumstances shall any
amount payable to CytRx under this Agreement be reduced, whether by set-off,
counterclaim, adjustment or otherwise, by virtue of any claim against Vaxcel
asserted or alleged by Vaxcel, any of its Affiliates, any assignees,
sublicensees or any other party, or any other person.
ARTICLE IV
CERTAIN RESPONSIBILITIES OF THE PARTIES
4.1 Development Responsibility. Vaxcel shall be responsible for
determining a commercialization strategy and for conducting, at its cost and
expense, all activities relating to the development, manufacture and marketing
of the Products including, without limitation, the conduct of preclinical and
clinical testing, product registration activities, the establishment of a sales
force or distribution network, and the promotion and sale of Products.
4.2 Commercialization of Products and Indications. Vaxcel shall
commercialize the Products as promptly as practicable, consistent with
commercially reasonable practice. Vaxcel shall provide CytRx with semi-annual
updates (which may be oral, unless CytRx requires a written update), in
reasonable detail, describing the progress of the development and
commercialization of the Products and the development activities in the Field.
In addition, representatives of CytRx and Vaxcel shall meet not less frequently
than twice each calendar year to review and discuss the development and
commercialization activities of Vaxcel with respect to the Products.
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4.3 Government Approvals. Vaxcel shall be responsible, at its cost and
expense, for obtaining and maintaining all approvals, licenses, registrations or
authorizations, including pricing and reimbursement approvals, of any U.S. or
non-U.S. national, state or local regulatory agency, department, bureau or other
government entity, including the FDA and USDA, necessary for the manufacture,
use, storage, transport or sale of Products sold by or on behalf of Vaxcel. All
such approvals, registrations and authorizations shall be in the name of Vaxcel.
4.4 Assistance by CytRx. Vaxcel may request the assistance of CytRx in
the development and commercialization activities related to the Product. If
CytRx agrees to provide any such assistance, the services provided by CytRx
employees shall be paid by Vaxcel in accordance with the Services and Facilities
Agreement between CytRx and Vaxcel effective as of January 1, 1993 (the
"Services Agreement"), unless otherwise agreed to in writing by the parties.
4.5 Drug Master File. CytRx shall be responsible for preparing and
maintaining a Drug Master File on the Copolymer (the "DMF") and submitting said
DMF to the FDA and certain international regulatory agencies, as designated by
Vaxcel. CytRx may request the assistance of Vaxcel in the preparation and
maintenance of the DMF. Unless otherwise agreed to in writing by CytRx and
Vaxcel, the services provided by CytRx employees in connection with any such
assistance shall be paid by Vaxcel in accordance with the Services Agreement.
CytRx shall maintain ownership of the DMF and shall allow Vaxcel and its third
party sublicensee(s) access to the DMF for confidential regulatory purposes.
4.6 Supply of the Copolymer by CytRx; Finished Chemical Product. CytRx
shall supply Vaxcel's requirements of the Copolymer in accordance with the terms
of the Amended and Restated Supply Agreement between CytRx and Vaxcel effective
as of August 10, 1995.
4.7 Non-Competition.
(a) During the term of this Agreement and for five years
thereafter Vaxcel shall not, directly or indirectly, develop, market, sell or
distribute any product in the CytRx Field. For purposes of this Agreement, the
term "CytRx Field" means use of surfactant, surfactant-like, and
glycosaminoglycan molecules and all derivatives, modifications, analogues and
variations thereof, as biologically active agents. These molecules include
poloxamers, poloxamines, tetronics, ethoxylated fatty acids, tritons, tweens,
and all derivatives, modifications, analogues and variations thereof.
(b) During the term of this Agreement, CytRx shall not, and
shall not license other persons to, directly or indirectly, develop, market,
sell or distribute any product that consists of a
polyoxyethylene/polyoxypropylene copolymer in the Field; provided, however, that
for the purposes of this Section 4.7(b) only, "Field" shall not
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include (and this Section 4.7(b) shall not apply to) sales of TiterMax or any
successor brands for vaccine research in non-human animals.
ARTICLE V
PROTECTION OF LICENSED TECHNOLOGY
5.1 Prosecution of Patents.
(a) From and after the Effective Date, Vaxcel shall be
responsible, at its cost and expense, for prosecuting to issuance all patent
applications, for filing and prosecuting all patent reissues and
re-examinations, for applying for and obtaining any patent term extensions, and
for paying all maintenance fees, on all applications and patents which
constitute Vaccine Patent Rights under this Agreement. CytRx shall retain
responsibility for such obligations as they relate to the Block Copolymer Patent
Rights.
(b) Each party shall cooperate with the other party including,
without limitation, executing all lawful papers and instruments and making all
rightful oaths and declarations, as may be necessary in the preparation and
prosecution of all such patents and other protections related to the Technology.
(c) In the event Vaxcel should elect not to continue the
prosecution of any patent application, patent reissue or patent re-examination,
to apply for a patent extension, or to pay a patent maintenance fee that relates
to the Vaccine Patent Rights, Vaxcel shall notify CytRx of such decision at
least forty-five (45) days in advance of the due date for such action or
payment, and CytRx shall have the right, but not the obligation, to assume
Vaxcel's responsibility therefor, but upon such notice from Vaxcel such patents
or applications shall be excluded from the definition of Vaccine Patent Rights
under this Agreement.
5.2 Infringement of Patents.
(a) Each party shall promptly give written notice to the other
party of any infringement or possible infringement of any of the Technology by a
third party.
(b) Vaxcel shall be responsible, at its discretion and at its
cost and expense, for prosecuting any such infringement. In such event, CytRx
shall cooperate with Vaxcel, at Vaxcel's expense. Vaxcel shall not settle or
compromise any such suit in a manner that imposes any obligations or
restrictions on CytRx or grants any rights to the Technology, without CytRx's
prior written consent (which consent shall not be unreasonably withheld).
Notwithstanding the above, CytRx may (at its expense) elect to prosecute any
infringement of the Block Copolymer Patent Rights and Vaxcel shall cooperate
with CytRx.
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(c) If Vaxcel fails to prosecute such infringement in a
reasonable period of time (but in no event later than sixty (60) days after
CytRx receives notice thereof), CytRx shall have the right, but not the
obligation, to prosecute such infringement at its own expense, but such
Technology shall be excluded from the definition of Technology under this
Agreement. In such event, Vaxcel shall cooperate with CytRx, at CytRx's expense.
(d) Any recovery obtained by the prosecuting party as the
result of such proceeding, by settlement or otherwise, shall be applied first,
to the prosecuting party, in an amount equal to its costs and expenses of the
litigation. Any remaining damage award shall be allocated 80% to the party
prosecuting the claim and 20% to the non-prosecuting party.
ARTICLE VI
TERMINATION
6.1 Term. This Agreement shall begin on the Effective Date and, unless
sooner terminated under this Article VI, shall expire upon the later of ten
years after the first commercial sale of the initial Product, or expiration of
the last-to-expire patent included in the Patent Rights.
6.2 Termination by CytRx.
(a) Upon the occurrence of any of the events set forth below
("Events of Default"), CytRx shall have the right to terminate this Agreement by
giving written notice of termination, such termination to be effective with the
giving of such notice:
(1) nonpayment of any amount payable to CytRx that is
continuing thirty (30) calendar days after CytRx gives Vaxcel written notice of
such nonpayment;
(2) breach by Vaxcel of any covenant (other than a
payment covenant included in clause (1)) or of any representation or warranty
contained in this Agreement that is continuing sixty (60) calendar days after
CytRx gives Vaxcel written notice of such breach;
(3) Vaxcel becomes insolvent, or voluntary or
involuntary proceedings by or against Vaxcel are instituted in bankruptcy or
under any insolvency law, or a receiver or custodian is appointed for Vaxcel, or
proceedings are instituted by or against Vaxcel for corporate reorganization or
the dissolution of Vaxcel, which proceedings, if involuntary, shall not have
been dismissed within sixty (60) days after the date of filing, or Vaxcel makes
an assignment for the benefit of creditors;
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(4) the cessation of operations by Vaxcel (other than
pursuant to a merger, reorganization or consolidation in which Vaxcel is not the
surviving corporation or a sale by Vaxcel of all or substantially all of its
assets);
(5) the seizure or attachment of all or substantially
all of the assets of Vaxcel, in conjunction with any action against it by any
third party, which seizure or attachment is not released within forty-five (45)
days after such seizure or attachment and which is contested in good faith by
Vaxcel;
(6) the failure of Vaxcel or any sublicensee thereof
to have used its best efforts to file a Product License Application ("PLA") with
the FDA by the seventh anniversary of the Effective Date for a Product that
under applicable FDA rules and regulations does not require a full-scale
efficacy trial prior to the filing of the PLA;
(7) the failure of Vaxcel or any sublicensee thereof
to have used its best efforts to make any commercial sales of a Product in the
United States, Europe or Japan by the eighth anniversary of the Effective Date;
or
(8) Vaxcel at any time discontinues the marketing and
sale of all Products under this Agreement.
(b) No exercise by CytRx of any right of termination will
constitute a waiver of any right of CytRx for recovery of any moneys then due to
it hereunder or any other right or remedy CytRx may have by law or by this
Agreement.
6.3 Termination by Vaxcel. Vaxcel shall have the right to terminate
this Agreement upon sixty (60) calendar days notice to CytRx upon breach by
CytRx of any covenant, representation or warranty that is continuing sixty (60)
calendar days after Vaxcel gives CytRx written notice of such breach.
6.4 No Other Events of Termination. This Agreement shall terminate or
otherwise be deemed to end if and only if the expiration or termination is
effected pursuant to Sections 6.1, 6.2 or 6.3 hereof.
6.5 Rights and Duties Upon Termination. Within 30 days after
termination of this Agreement under Sections 6.2 or 6.3:
(a) Each party shall return to the other party any trade
secrets or confidential information of the other party received pursuant to this
Agreement or otherwise.
(b) Vaxcel also shall deliver to CytRx all Technology which is
embodied in physical form, together with any and all promotional materials and
other data, information, test results, marketing information, customer lists and
records, distributor lists and records, sales data and projections and any other
information under
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Vaxcel's control that is related to the manufacture, marketing or sale of
Product or Copolymer.
(c) Upon termination of this Agreement by CytRx (except
termination for breach by Vaxcel), Vaxcel may sell remaining inventory and
finished goods for a period not to exceed six (6) months, subject to the royalty
obligations and other provisions of this Agreement.
6.6 Survival of Contents. Notwithstanding anything else in this
Agreement to the contrary, the parties agree that Vaxcel's obligation to pay any
royalties accrued but unpaid prior to such termination shall survive the
termination of this Agreement. In addition, Sections 2.3, 4.7(a), 5.2, 6.5, 7.1
and 7.2(a) and this Section 6.6 and Articles IX and X shall survive the
termination of this Agreement, together with any other provisions to the extent
required for the full observation and performance of the surviving terms by any
or all of the parties hereto.
ARTICLE VII
CERTAIN COVENANTS
7.1 Proprietary Information.
(a) Non-Disclosure Covenant. Trade Secrets and Confidential
Information and all physical embodiments thereof received by one party (the
"Receiving Party") from the other (the "Disclosing Party") during the term of
this Agreement are confidential to and are and will remain the sole and
exclusive property of the Disclosing Party. At all times, both during the term
of this Agreement and after its termination, Receiving Party shall hold all
Trade Secrets of Disclosing Party in confidence, and will not use, copy or
disclose such Trade Secrets, or any physical embodiment thereof, or cause any of
such Trade Secrets to lose their character as Trade Secrets. At all times during
the term of this Agreement and for a period of three (3) years following its
termination, Receiving Party shall hold the Confidential Information of
Disclosing Party in confidence, and will not use, copy or disclose such
Confidential Information, or any physical embodiments thereof, or cause any of
such Confidential Information to lose its character or cease to qualify as
Confidential Information.
(b) Security Measures. Trade Secrets and Confidential
Information shall be maintained under secure conditions by Receiving Party,
using reasonable security measures and in any event (1) not less than the same
security measures used by Receiving Party for the protection of its own trade
secrets and confidential information of a similar kind, and (2) any specific
security measures required by Disclosing Party. Receiving Party shall not
remove, obscure, or deface any proprietary legend relating to the Disclosing
Party's rights, on or from any tangible embodiment of any Trade Secrets or
Confidential Information without the Disclosing Party's prior written consent.
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(c) Disclosure Ordered by Government Bodies. If Receiving
Party is ordered by a court, administrative agency, or other governmental body
of competent jurisdiction to disclose Trade Secrets or Confidential Information,
or if it is served with or otherwise becomes aware of a motion or similar
request that such an order be issued, then Receiving Party will not be liable to
Disclosing Party for disclosure of Trade Secrets or Confidential Information
required by such order if Receiving Party complies with the following
requirements: (1) if an already-issued order calls for immediate disclosure,
then Receiving Party shall immediately move for or otherwise request a stay of
such order to permit Disclosing Party to respond as set forth in this Section
7.1(c); (2) Receiving Party shall immediately notify Disclosing Party of the
motion or order by the most expeditious possible means; and (3) Receiving Party
shall join or agree to (or at a minimum shall not oppose) a motion or similar
request by Disclosing Party for an order protecting the confidentiality of the
Trade Secrets and Confidential Information including joining or agreeing to (or
nonopposition to) a motion for leave to intervene by Disclosing Party.
(d) Reports of Misappropriation by Others. Receiving Party
shall immediately report to Disclosing Party any attempt by any person of which
Receiving Party has knowledge (1) to use or disclose any portion of the Trade
Secrets or Confidential Information without authorization from Disclosing Party,
or (2) to copy, reverse assemble, reverse compile or otherwise reverse engineer
any part of such materials (except as permitted herein).
(e) Trade Secrets Defined. "Trade Secrets" means information
related to Disclosing Party (1) which derives economic value, actual or
potential, from not being generally known to or readily ascertainable by other
persons who can obtain economic value from its disclosure or use, and (2) which
is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy. . (f) Confidential Information Defined. "Confidential
Information" means information that is (1) confidential to the business of
Disclosing Party, (2) is designated and identified as such by Disclosing Party,
and (3) is not a Trade Secret; provided, however, that Confidential Information
does not include:
(1) any information that is at the time of receipt by
Receiving Party or thereafter becomes part of the public domain (through
publication or otherwise);
(2) any information that was independently known to
Receiving Party prior to receipt thereof from Disclosing Party, as evidenced by
written records of Receiving Party;
(3) any information that was disclosed to Receiving
Party by a third party having the right to disclose such information; or
(4) information that is required to be disclosed by
Receiving Party by proper order of a court or administrative body, but prior to
such disclosure Receiving Party must notify Disclosing Party of its belief that
disclosure is required.
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Notwithstanding the foregoing, it is understood that Receiving Party
may disclose Trade Secrets and Confidential Information to its consultants,
outside contractors, clinical investigators and agents if such persons agree to
keep such information confidential to the same extent Receiving Party is so
obligated hereunder, and agree to use such information only for such purposes as
Receiving Party is authorized to use such information.
7.2 Certain Trademark Matters.
(a) Vaxcel shall have the right and the obligation, at its
sole cost and expense, to select, register, prosecute, maintain and defend all
trademarks used with Products under this Agreement. Upon termination of this
License Agreement by CytRx under Section 6.2 hereof, Vaxcel shall transfer and
assign such trademarks and any registrations relating thereto to CytRx or
CytRx's designee.
(b) CytRx shall be entitled to use and refer to Vaxcel's
trademarks in CytRx's reports to stockholders, registration statements, private
placement memoranda and similar corporate documents and records, without
obligation to Vaxcel.
7.3 Compliance with Laws. Vaxcel shall comply with all applicable laws,
rules and regulations pertaining to the use of the Technology and the
development, marketing, advertising and distribution of the Products.
7.4 Taxes. All taxes, assessments and fees of any nature levied or
incurred on account of any payments accruing under this Agreement, by national,
state or local governments, will be assumed and paid by Vaxcel, except taxes
levied thereon as income to CytRx, and if such taxes are required to be withheld
by Vaxcel, they will be deducted from such payments due to CytRx and will be
paid by Vaxcel for the account of CytRx, a receipt thereof secured, if available
and sent to CytRx. If for any reason CytRx cannot credit such withholding tax in
a particular country against the Federal income taxes paid by CytRx, Vaxcel
shall increase the royalty in such country to provide CytRx with a net amount
equal to the royalty that would have been paid absent such withholding tax.
7.5 Press Releases. Vaxcel shall provide CytRx with the prior
opportunity to approve any press release or similar public announcement
concerning this Agreement, the Technology or the Products, as soon as
practicable but in no event later than 24 hours before the announcement is made.
CytRx acknowledges that its opportunity to review and approve press
announcements is subject to and may be limited by any securities laws to which
Vaxcel may be subject that require immediate disclosure.
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<PAGE> 15
ARTICLE VIII
DISCLAIMERS
8.1 No Warranty. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 11.1 HEREOF,
CYTRX MAKES NO EXPRESS OR IMPLIED WARRANTIES, STATUTORY OR OTHERWISE, CONCERNING
THE TECHNOLOGY, THE PRODUCTS OR ANY INFORMATION COMMUNICATED TO VAXCEL BY CYTRX.
SPECIFICALLY, BUT WITHOUT LIMITING THE FOREGOING, CYTRX MAKES NO EXPRESS OR
IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS (FOR A PARTICULAR PURPOSE OR
OTHERWISE), QUALITY OR USEFULNESS OF THE TECHNOLOGY OR THE PRODUCTS. THE RIGHTS
GRANTED HEREUNDER ARE GRANTED ON AN "AS IS" BASIS. CytRx does not warrant the
accuracy of any information included within the Technology nor does CytRx
warrant that any such information constitutes Trade Secrets or Confidential
Information or that the Technology will be free from claims of infringement by
third parties or any other rights of third parties. Under no circumstances shall
CytRx be liable to Vaxcel or any third party for consequential damages in tort
or contract or otherwise incurred by Vaxcel or any third party.
ARTICLE IX
INDEMNITY
9.1 Indemnification by Vaxcel. Vaxcel will indemnify and hold harmless
CytRx and its Affiliates, employees, officers, directors, stockholders and
agents (a "CytRx Indemnified Party") from and against any and all liability,
loss, damages, costs, or expenses (including reasonable attorneys' fees) which
the CytRx Indemnified Party may incur, suffer or be required to pay resulting
from or arising in connection with (a) the breach by Vaxcel of any covenant,
representation or warranty of Vaxcel contained in this Agreement, (b) the
manufacturing, marketing, sale or distribution of any Product by Vaxcel or any
person on behalf of Vaxcel, (c) the use by any person of any Product that was
manufactured, marketed, sold or distributed by Vaxcel or any Affiliate or
sublicensee, (d) any contamination of or defect in any Product, (e) the use by
Vaxcel or any Affiliate or sublicensee of the Technology or the Products, or (f)
the successful enforcement by a CytRx Indemnified Party of any of the foregoing.
9.2 Indemnification by CytRx. CytRx will indemnify and hold harmless
Vaxcel and its Affiliates, employees, officers, directors, shareholders and
agents (a "Vaxcel Indemnified Party") from and against any and all liability,
loss, damages, costs or expenses (including reasonable attorneys' fees) which
the Vaxcel Indemnified Party may incur, suffer or be required to pay resulting
from or arising in connection with (a) the breach by CytRx of any covenant,
representation or warranty of CytRx contained in this Agreement, or (b) the
successful enforcement by a Vaxcel Indemnified Party of any of the foregoing.
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<PAGE> 16
9.3 Conditions to Indemnification. The obligations of the indemnifying
party under Sections 9.1 and 9.2 are conditioned upon the prompt notification to
the indemnifying party of any of the aforementioned suits or claims in writing
within fifteen (15) days after receipt of notice by the indemnified party of
such suit or claim. The indemnifying party shall have the right to assume the
defense of any such suit or claim unless, in the reasonable judgment of the
indemnified party, such suit or claim involves an issue or matter which could
have a materially adverse effect on the business, operations or assets of the
indemnified party, in which event the indemnified party may control the defense
or settlement thereof. If the indemnifying party defends the claim, the
indemnified party may participate in the defense of such suit or claim at its
sole cost and expense. This provision for indemnification shall be void and
there shall be no liability against a party as to any suit or claim for which
settlement or compromise or an offer of settlement or compromise is made without
the prior consent of the indemnifying party.
ARTICLE X
JURISDICTION
10.1 Jurisdiction. Each party irrevocably and unconditionally (a)
agrees that any suit, action or other legal proceeding under this Agreement may
be brought in the United States District Court for the Northern District of
Georgia or, if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in Fulton County, Georgia;
(b) consents to the jurisdiction of any such court in any such suit, action or
proceeding; and (c) waives any objection that it may have to personal
jurisdiction or the laying of venue of any such suit, action or proceeding in
any such court.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
11.1 Representations and Warranties of CytRx. CytRx represents and
warrants to Vaxcel as follows:
(a) It is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(b) The execution and delivery of this Agreement have been
duly and validly authorized, and all necessary action has been taken to make
this Agreement a legal, valid and binding obligation of CytRx enforceable in
accordance with its terms.
(c) The execution and delivery of this Agreement and the
performance by CytRx of its obligations hereunder will not contravene or result
in any breach of the
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<PAGE> 17
Certificate of Incorporation or Bylaws of CytRx or result in any material breach
or violation of or material default under any material agreement, indenture,
license, instrument or understanding or, to the best of its knowledge, result in
any violation of any law, rule, regulation, statute, order or decree to which
CytRx or any of its Affiliates is a party or by which any of them or any of
their property is subject.
(d) CytRx has not received notice of any claim that the
Copolymer or any of the Products or Patent Rights infringe upon any third
party's know-how, patent or other intellectual property rights.
(e) CytRx is the exclusive owner or licensee of all rights in
and to the Technology, subject to the Federal Government Interest, the rights of
Emory under the Emory Agreement, and the rights of BASF under the BASF
Agreement.
11.2 Representations and Warranties of Vaxcel. Vaxcel represents and
warrants to CytRx as follows:
(a) Vaxcel is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
(b) The execution and delivery of this Agreement have been
duly and validly authorized, and all necessary action has been taken to make
this Agreement a legal, valid and binding obligation of Vaxcel enforceable in
accordance with its terms.
(c) The execution and delivery of this Agreement and the
performance by Vaxcel of its obligations hereunder will not contravene, or
result in any breach of, the Certificate of Incorporation or Bylaws of Vaxcel,
or result in any material breach or violation of or material default under any
material agreement, indenture, license, instrument or understanding or, to the
best of its knowledge, result in any violation of any law, rule, regulation,
statute, order or decree to which Vaxcel or any of its Affiliates is a party or
by which any of them or any of their property is subject.
ARTICLE XII
MISCELLANEOUS
12.1 Entire Agreement: Amendment. This Agreement, together with the
Exhibits annexed hereto sets forth and constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof, and supersedes any
and all prior agreements, understandings, promises, and representations made by
either party to the other concerning the subject matter hereof and the terms
applicable hereto. This Agreement may not be released, discharged, amended or
modified in any manner except by an instrument in writing signed by duly
authorized representatives of Vaxcel and CytRx.
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<PAGE> 18
12.2 Parties Independent. In making and performing this Agreement, the
parties act and shall act at all times as independent entities and nothing
contained in this Agreement shall be construed or implied to create an agency,
partnership or employer and employee relationship between Vaxcel and CytRx.
Except as specifically provided herein, at no time shall either party make
commitments or incur any charges or expenses for or in the name of the other
party.
12.3 Effect of Invalidity of Certain Provisions. Any term or provision
of this Agreement which is invalid or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement.
12.4 Governing Law. This Agreement shall be deemed to have been entered
into and shall be construed and enforced in accordance with the laws of the
State of Delaware.
12.5 Waivers. The failure of either party to insist, in any one or more
instances, upon the performance of any of the terms, covenants or conditions of
this Agreement and to exercise any right hereunder, shall not be construed as a
waiver or relinquishment of the future performance of any such term, covenant or
condition or the future exercise of such right, but the obligations of the other
party with respect to such future performance shall continue in full force and
effect.
12.6 Headings. The headings of the articles, sections and paragraphs
used in this Agreement are included for convenience only and are not to be used
in construing or interpreting this Agreement.
12.7 Notice. Any notice or other communication required or permitted to
be made or given to either party hereto pursuant to this Agreement shall be
sufficiently made or given if sent to such party by either telecopy transmission
or certified or registered first class mail, postage prepaid, return receipt
requested addressed to it as follows:
If to CytRx:
CytRx Corporation
154 Technology Parkway
Norcross, GA 30092
FAX No. (770) 448-3357
Attention: President
with a copy to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
FAX No. (404) 881-7777
Attention: George M. Maxwell, Jr.
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<PAGE> 19
If to Vaxcel:
Vaxcel, Inc.
154 Technology Parkway
Norcross, GA 30092
FAX No. (770) 453-0194
Attention: President
or to such other address as either party shall designate by written notice,
similarly given, to the other party. Any notice if given or made by certified or
registered first class mail letter, return receipt requested, shall be deemed to
have been received on the earlier of the date actually received and the date
three (3) days after the same was posted (and in proving such it shall be
sufficient to prove that the envelope containing the same was properly addressed
and posted as aforesaid) and if given or made by telecopy transmission shall be
deemed to have been received at the time of dispatch, unless such date of deemed
receipt is not a business day, in which case the date of deemed receipt shall be
the next succeeding business day.
12.8 Successors and Assigns. This Agreement shall not be assignable by
either party without the prior written consent of the other party, except that
such consent is not required in connection with the assignment of either party's
rights or obligations hereunder to an Affiliate thereof or to any successor to
substantially all of this Agreement. Subject to the foregoing, this Agreement,
and each and every provision hereof, shall be binding upon and shall inure to
the benefit of the parties, their respective successors, successors-in-title,
heirs and assigns, and each and every successor-in-interest to any party,
whether such successor acquires such interest by way of gift, purchase,
foreclosure, or by any other method, shall hold such interest subject to all the
terms and provisions of this Agreement.
12.9 Counterparts. This Agreement shall become binding when any one or
more counterparts hereof, individually or taken together, shall bear the
signatures of each of the parties hereto. This Agreement may be executed in any
number of counterparts, each of which shall be an original as against either
party whose signature appears thereon, but all of which together shall
constitute but one and the same instrument.
12.10 License of Additional Copolymer(s) to Vaxcel. CytRx grants Vaxcel
the right to evaluate and request a license in the Field for a copolymer(s)
different than those described on Exhibit B. If such a license request is duly
approved by both parties, such copolymer(s) shall be deemed to be included
within the definition of Copolymer in Section 1.1 of this Agreement and the
parties will amend Exhibit B to reflect the additional licensed copolymer(s).
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<PAGE> 20
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
CYTRX CORPORATION
By: /s/ Jack J. Luchese
----------------------------------
Name: Jack J. Luchese
Title: President and Chief Executive
Officer
VAXCEL, INC.
By: /s/ Paul J. Wilson
----------------------------------
Name: Paul J. Wilson
Title: President and Chief
Executive officer
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<PAGE> 21
EXHIBIT B
DESCRIPTION OF
COPOLYMERS LICENSED
TO VAXCEL BY CYTRX
DESCRIPTION - Synthetically produced block copolymers composed of a central
hydrophobic core of polyoxypropylene of 12,000 kd molecular weight, flanked by
hydrophilic chains of polyoxyethylene (including those synthesized by SCF
processes) as designated in the following chart.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Copolymer Peak Molecular
Designation % POE Weight
- -----------------------------------------------------------------------------
<S> <C> <C>
CRL-8196 2.5% 12,470
- -----------------------------------------------------------------------------
CRL-1005 5.0% 12,670
- -----------------------------------------------------------------------------
CRL-1309 7.5% 12,880
- -----------------------------------------------------------------------------
CRL-2690 10% 13,090
- -----------------------------------------------------------------------------
CRL-4279 15% 13,530
- -----------------------------------------------------------------------------
CRL-4654 20% 14,240
- -----------------------------------------------------------------------------
</TABLE>
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<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of this 16th day of August, 1993,
by and between VAXCEL, INC., a Delaware corporation ("Vaxcel"), and PAUL J.
WILSON (the "Executive").
RECITALS
WHEREAS, Vaxcel desires to employ the Executive as President and Chief
Executive Officer of Vaxcel in accordance with the terms and provisions hereof;
NOW THEREFORE, in consideration of the premises and intending to be
legally bound hereby, Vaxcel and the Executive hereby agree as follows:
ARTICLE I
TERM AND SCOPE OF EMPLOYMENT
1.01. Term. Vaxcel hereby employs the Executive, subject to the terms
and conditions hereof, and the Executive accepts such employment with Vaxcel for
a term (the "Term") beginning on August 16, 1993 (the "Effective Date") and
ending on the third anniversary of the Effective Date, unless terminated earlier
in accordance with Article IV hereof. Vaxcel will, in good faith, consider an
extension of this agreement upon mutually acceptable terms at the end of the
Term.
1.02. Duties of Executive. The Executive shall serve as the President
and Chief Executive Officer of Vaxcel, with general supervision over its
business and operations, including the development and execution of the Vaxcel
business strategy, the management of the Vaxcel assets, capital formation and
the recruitment and development of management, subject, however, to the control
of Vaxcel's Board of Directors. The Executive agrees during the term of this
Agreement to serve on a full-time basis in the performance and discharge of his
duties.
1.03. Board Position. Upon execution of this agreement by both parties,
Executive will become a member of the Board of Directors of Vaxcel.
ARTICLE II
COMPENSATION
2.01. Cash Compensation. As total cash compensation for his services
rendered during the Term, Vaxcel shall pay the Executive an annual salary of
$175,000 for the first
<PAGE> 2
12 months during the Term, $187,000 for the second 12 months during the Term,
and $200,000 for the third 12 months during the Term, payable in equal monthly
installments. The Executive will not be eligible to receive or be considered for
cash bonuses during the Term, it being understood and acknowledged by the
Executive that the foregoing cash compensation includes an allowance for
bonuses.
2.02. Stock Options. Vaxcel has granted to the Executive, subject to
his execution of this Agreement, options under its 1993 Stock Option Plan to
purchase up to 400,000 shares of Common Stock of Vaxcel ("Vaxcel Shares") at an
exercise price of $1.75 per share and otherwise in the form of Exhibit A hereto
(collectively, the "Executive Options"). The Executive Options will vest and be
exercisable, subject to the provisions of Article IV, as follows:
(a) Category I Options. Options to purchase up to 120,000
Vaxcel Shares (the "Category I Options") will vest according to the following
schedule:
(i) 40,000 to vest on the first anniversary of the
Effective Date;
(ii) 40,000 to vest on the second anniversary of the
Effective Date; and
(iii) 40,000 to vest on the third anniversary of the
Effective Date.
(b) Category II Options. Options to purchase up to 225,000
Vaxcel Shares (the "Category II Options") will vest when and if any of the
following occur during the term of the Executive's employment with Vaxcel (even
if such event occurs during the Executive's employment after the Term):
(i) 65,000 to vest when Vaxcel consummates equity
financing which provides the first $5,000,000 in net
proceeds to Vaxcel;
(ii) 40,000 to vest when Vaxcel consummates equity
financing which provides the next $15,000,000 in net
proceeds to Vaxcel;
(iii) 40,000 to vest when Vaxcel achieves $1,000,000
in operating profit in any 12 consecutive months
resulting from sales of any product or products being
marketed by Vaxcel;
(iv) 40,000 to vest upon the successful completion of
the first significant development and
commercialization agreement with a major corporate
vaccine partner related to a product under the
Optivax(TM) License Agreement, as determined by the
Vaxcel Board of Directors; and,
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<PAGE> 3
(v) 40,000 to vest upon the successful completion of
the second significant development and
commercialization agreement with a major corporate
vaccine partner related to an Optivax(TM) product, as
determined by the Vaxcel Board of Directors.
For purposes of this Agreement: (i) "Net Proceeds" means gross proceeds from the
sale of securities less any expenses, fees and underwriting discounts incurred
in connection with the financing; and, (ii) "Operating Profit" means gross sales
of TiterMax and any other Vaxcel product sold as finished products (which
excludes products covered by Optivax(TM) License Agreements) less sales
returns/allowances, costs of goods sold, distribution promotion (including
salaried marketing), personnel, product support and other product costs. The
result should be a "brand" operating profit before interest, taxes, general and
administrative-overhead.
(c) Category III Options. Options to purchase ,up to 55,000
Vaxcel Shares (the "Category III Options") will vest if the price of Vaxcel
Common Stock reaches or exceeds an average of $8.00 per share during any 20
consecutive trading days during the term of the Executive's employment with
Vaxcel (even if such event occurs during the Executive's employment after the
Term).
2.03. Registration Rights. Vaxcel will use its best efforts to file a
registration statement on Form S-8 under the Securities Act of 1933 covering the
Vaxcel Shares subject to the Executive Options, as soon as practicable following
the first public offering of Common Stock by Vaxcel which yields net proceeds of
at least $10,000,000 (the "Offering"), and to cause the registration statement
to become effective as soon as practicable. Vaxcel's obligation to undertake the
registration will be subject, however, to any "lock-up" or similar obligation
imposed by the underwriter in the offering that prohibits Vaxcel from
registering Vaxcel Shares.
ARTICLE III
EXECUTIVE BENEFITS
3.01. Relocation Expenses.
(a) The Executive will be entitled to the benefits specified
in Vaxcel's relocation policy attached as Exhibit B hereto, except that the
carrying costs shall be 180 days rather than 90 days.
(b) Vaxcel will reimburse the Executive for his reasonable
out-of-pocket expenses incurred to engage the independent auditors of Vaxcel or
of CytRx Corporation to prepare Executive's state (Georgia and New Jersey) and
federal income tax returns for calendar year 1993.
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<PAGE> 4
(c) If this Agreement is signed by Vaxcel and the Executive,
Vaxcel will reimburse the Executive for reasonable attorneys fees incurred in
the review and execution of this Agreement, up to maximum of $2,500, to be paid
immediately following the Effective Date.
(d) In addition to the benefits described on Exhibit B, the
Executive will be entitled to a relocation allowance of $10,000 (grossed up for
a 28% federal tax rate and 6% Georgia tax rate), payable as follows:
(i) $5,000 (grossed up for a 28% federal tax rate and
6% Georgia tax rate) upon the execution by the
Executive of an agreement of sale by which he is to
purchase a residence in the Atlanta, Georgia
metropolitan area; and,
(ii) $5,000 (grossed up for a 28% federal tax rate
and 6% Georgia tax rate) upon the closing of the
purchase by the Executive of a residence in the
Atlanta, Georgia metropolitan area.
(e) Vaxcel also will reimburse the Executive for the
difference, if any, between the actual selling price of his residence in
Kinnelon, New Jersey (excluding seller's allowances and credits and any brokers'
fees, transfer taxes and other transaction costs incurred by the Executive) and
the Appraised Value of such residence. For purposes of this Agreement, the term
"Appraised Value" means the value agreed to by the Executive and Vaxcel based
upon the average of three appraisals by independent, reputable firms experienced
in such matters in the general vicinity of Kinnelon, New Jersey. The Executive
shall furnish copies of the three appraisals to Vaxcel promptly after the
execution of this Agreement. Vaxcel shall reimburse the Executive for the
reasonable out-of-pocket fees and expenses charged by such appraisers. In no
event, however, shall the amount guaranteed to the Executive under this Section
3.01(e) exceed $20,000.
3.02. Vacation. The Executive shall be entitled to one week of vacation
with pay for each quarter of employment with Vaxcel, plus ten paid holidays
during each twelve-month period commencing on the Effective Date during the
term, with a guarantee of two weeks of paid vacation during calendar 1993. Such
vacation shall not be cumulative from year to year, and Vaxcel shall not be
obligated to pay the Executive for any vacation that has been earned but not
taken, except that if the Executive is terminated by Vaxcel pursuant to Sections
4.02 or 4.03 hereof, the Executive shall be entitled to receive payment for any
vacation that has been earned but not taken in the calendar year in which such
termination occurs.
3.03. Miscellaneous Benefits. Vaxcel will provide to the Executive such
other employment benefits, including participation in a 401(k) plan, and group
medical, dental and long-term disability insurance, as may be approved by the
Board of Directors of Vaxcel for senior management. A description of the current
employee benefits is attached as Exhibit C hereto, but any such benefits may be
changed from time to time. In addition,
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<PAGE> 5
Vaxcel will obtain a personal disability rider with respect to the Executive in
an amount equal to his then-current cash compensation under Article II.
3.04. Business Expenses. Vaxcel shall pay or shall reimburse the
Executive's reasonable travel, hotel, entertainment and other necessary and
proper expenses incurred while traveling on or conducting the business of
Vaxcel, to the extent such expenses are incurred in accordance with the
reimbursement policy of Vaxcel as in effect from time to time.
ARTICLE IV
TERMINATION
4.01. Termination For Cause. Vaxcel may terminate the Executive's
employment hereunder for cause by giving the Executive written notice of the
effective date of such termination. For purposes of this Agreement, "for cause"
shall mean termination of the Executive's employment by the Board of Directors
of Vaxcel because of any of the following:
(i) material breach of contract by the Executive;
(ii) failure or inability of the Executive to carry out
reasonable directives of the Board of Directors of Vaxcel;
(iii) conviction of the Executive for a felony, even if such
conviction is subject to appeal;
(iv) uncontroverted evidence of falsification of records or
statements of Vaxcel or any affiliate thereof by the
Executive;
(v) uncontroverted evidence of intentional misuse of funds or
property of Vaxcel or any affiliate thereof by the Executive;
or
(vi) other substantial misconduct by the Executive which, in
the reasonable judgment of the Board of Directors, results in
material adverse effect, discredit or disrepute to Vaxcel or
any affiliate thereof.
A termination for any cause listed in clauses (i) or (ii) above shall be
effective only if the Executive has been given notice by the Board and such
breach or default continues for fifteen (15) days following the date of such
notice. If the Executive believes that the directive of the Board of Directors
in question is not reasonable, he may refer the issue of reasonableness to a
panel of three individuals, one of whom has been selected by the Executive, one
of whom has been selected by Vaxcel and one of whom has been selected by mutual
agreement of the parties (or, if the parties cannot agree, by the other two
panel members). The dispute shall be resolved within thirty (30) days after the
Board has given
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<PAGE> 6
the Executive notice of breach. Any decision rendered by the panel shall be
binding on both parties.
4.02. Disability or Death of Executive. If the Executive becomes so
disabled because of sickness or physical or mental disability that it reasonably
appears to an independent physician selected by Vaxcel that he will be unable to
perform his duties under this Agreement for a period of three (3) months or
more, Vaxcel shall have the option to terminate his employment under this
Agreement upon sixty (60) days written notice to the Executive specifying the
effective date of such termination. This Agreement shall automatically terminate
upon the death of the Executive.
4.03. Termination Without Cause. The Board of Directors of Vaxcel may
terminate the Executive's employment hereunder without cause, upon thirty (30)
days written notice to the Executive specifying the effective date of such
termination.
4.04. Severance During Term. If the Executive's employment is
terminated by Vaxcel prior to the expiration of the Term, the Executive shall be
entitled to receive the following amount as severance:
(i) An amount equal to three month's salary (at the
then-current salary rate), if the Executive's employment is
terminated under Section 4.01 (ii), and an amount equal to one
month's salary (at the then-current salary rate), if the
Executive's employment is terminated for any other reason
under Section 4.01;
(ii) An amount equal to six month's salary, if the Executive's
employment is terminated by reason of the Executive's death or
disability under Section 4.02;
(iii) An amount equal to the cash compensation payable to the
Executive for the remainder of the Term, if the Executive's
employment is terminated by Vaxcel without cause under Section
4.03 hereof; provided however, in no event shall the Executive
receive less than $175,000 if his employment is terminated
under Section 4.03 as a result of bankruptcy or dissolution of
Vaxcel.
4.05. Severance After the Term. If the Executive's employment is
terminated by Vaxcel after the Term, the Executive shall be entitled to receive
the following amount as severance:
(i) An amount equal to one month's salary (at the then-current
salary rate), if the Executive's employment is terminated for
cause under Section 4.01;
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<PAGE> 7
(ii) An amount equal to six month's salary, if the Executive's
employment is terminated by Vaxcel for any reason other than
for cause under Section 4.01.
4.06. Actions to be Taken Upon Termination. Upon the termination of his
employment, the Executive shall deliver to Vaxcel all credit cards issued to him
by Vaxcel and all manuals, notebooks, reports, correspondence and other
materials relating to the business or affairs of Vaxcel which are in the
possession or control of the Executive. The Executive shall be entitled to all
remuneration accrued but unpaid up to the effective date of the termination of
his employment, but Vaxcel shall have no liability to compensate the Executive
for any period following such date, except as specifically set forth in Section
4.04 or 4.05.
4.07. Effect of Termination on Executive Options.
(a) If the Executive's employment is terminated by Vaxcel for
cause under Section 4.01, all Executive Options shall cease vesting as of the
effective date of termination, and shall remain exercisable for a period of
ninety (90) days after such termination (the "Expiration Date"). If the
Executive Options are not exercised prior to the Expiration Date, they will be
canceled.
(b) If the Executive's employment is terminated during the
Term for any reason (except termination for cause under Section 4.01), the
portion of the Category I options that would have vested at the next subsequent
anniversary will accelerate and become vested immediately.
(c) All vested Category I, Category II and Category III
Options will remain exercisable for ninety (90) days after the effective date of
termination of the Executive's employment.
ARTICLE V
STANDARDS OF CONDUCT FOR EXECUTIVE
5.01. General. The Executive will abide by Vaxcel's standards of
conduct for its employees, including all policies concerning the making or
receipt of any political contributions, gifts and solicitation.
5.02. Confidentiality, Inventions, etc. As a condition of his
employment with Vaxcel, the Executive shall execute, prior to the Effective
Date, a confidentiality and assignment of inventions agreement in the form of
Exhibit D hereto.
5.03. Non-Competition During Employment.
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<PAGE> 8
(a) For as long as the Executive remains employed by Vaxcel,
the Executive will not, without the prior approval of the Board of Directors,
directly or indirectly, engage in, manage, operate, control, have any interest,
financial or otherwise, be employed by, participate in, consult to or permit his
name to be used by or be connected in any manner with the ownership, management
or control of or in any other business enterprise, whether as an employee,
consultant, contractor, partner, shareholder, director, officer or otherwise,
that: (i) interferes or is likely to interfere with the independent exercise of
his judgment in the best interest of Vaxcel; or (ii) does business with Vaxcel
or competes with any product or line of business of Vaxcel or any affiliate of
Vaxcel.
(b) The Executive represents that except as disclosed on
Exhibit E hereto as of the Effective Date he is not engaged in any activity that
would be prohibited by clause (a). The Executive shall discontinue any such
activity in existence as of the Effective Date unless the Board of Directors has
determined that a conflict of interest does not exist.
5.04. Non-Competition After Employment. For a period of 24 months after
termination of Executive's employment with Vaxcel (whether such termination
occurs before or after the Term), the Executive will not, without the prior
approval of the Board of Directors, directly or indirectly, engage in, manage,
operate, control, have any interest, financial or otherwise, be employed by,
participate in, consult to or permit his name to be used by or be connected in
any manner with the ownership, management or control of any business enterprise
that is engaged in the research, development or commercialization of
polyoxyethylene/polyoxypropylene copolymers used as vaccine adjuvants or in
adjuvant emulsion systems.
ARTICLE VI
GENERAL PROVISIONS
6.01. Injunction. The Executive recognizes that, in the event of a
breach or threatened breach by him of any of the undertakings referred to
herein, damages may be an inadequate remedy therefor, and Vaxcel shall be
entitled to an injunction restraining such breach or threatened breach and to
resort to any other appropriate remedy either at law or in equity.
6.02. Notice. Notices or other communications required to be given or
made to any party hereto shall be in writing and shall be deemed to be given or
made when sent by registered or certified mail, postage prepaid, to such party
at its address shown below or to such other address to which such party may by
notice given in the manner provided for herein require that such notices be
sent:
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<PAGE> 9
If to Vaxcel, to:
Vaxcel, Inc.
150 Technology Parkway
Atlanta, Georgia 30092
Attention: Chairman of the Board of Directors
With a copy to:
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103
Attention: Barbara S. Schilberg, Esq.
If to Executive, to:
Paul J. Wilson
5775 Commons Lane
Alpharetta, GA 30202
6.03. Successors and Assigns. The rights and obligations of Vaxcel
under this Agreement shall inure to the benefit of and shall be binding upon its
successors and assigns.
6.04. Governing Law. This Agreement shall be governed by and
interpreted according to the laws of the State of Delaware.
6.05. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, and no modification hereof shall be effective unless it is
in writing and is signed by the parties hereto.
6.06. Severability. Any provision of this Agreement which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable and the
remaining provisions hereof, and any such invalidity or unenforceability shall
not invalidate or render unenforceable any other provision hereof.
6.07. Counterparts. This Agreement shall become binding when any one or
more counterparts hereof, individually or taken together, shall bear the
signatures of each party hereto. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against the part
whose signature appears thereon, but all of which taken together shall
constitute but one and the same instrument.
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<PAGE> 10
6.08. Definition of Affiliate. For purposes of this Agreement, the term
"affiliate" shall mean any person or entity directly or indirectly controlling,
controlled by or under common control with Vaxcel. The direct or indirect
ownership of over 50% of the outstanding voting securities of an entity, or the
right to receive over 50% of the profits or earnings of the entity, or the right
to control the policy decisions of a person or entity, shall be deemed to
constitute control.
6.09. No Publicity. The Executive shall not disclose this Agreement or
the terms hereof to any person, except to the extent any such disclosure is
required under applicable federal or state securities laws.
6.10. Escrow. Upon execution of this Agreement by both parties, Vaxcel
shall establish an escrow account for the benefit of the Executive, funded with
$175,000 in cash (with interest income, if any, paid to Vaxcel), to be applied,
as and when due, to the amounts owed as severance to the Executive under Section
4.04 of this Agreement. Disbursements from the escrow account shall be made in
accordance with the written instructions of the Board of Directors of Vaxcel.
The escrow account will be subject to termination by Vaxcel on the date when it
has raised a cumulative total of $3,000,000 or on December 31, 1994, whichever
is the first to occur. The form of escrow agreement shall be on such other terms
and conditions as shall be mutually satisfactory to the Executive and Vaxcel.
IN WITNESS WHEREOF, Vaxcel and the Executive have duly executed this
Employment Agreement as of the day and year set forth above.
Witness:
____________________ _____________________
Paul J. Wilson
VAXCEL, INC.
By:_________________
Jack J. Luchese
President & CEO
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<PAGE> 1
EXHIBIT 10.6
AMENDMENT NO. 1 TO
EMPLOYMENT AGREEMENT
This AMENDMENT NO. 1 (the "Amendment") is made as of this 6th day of
March 1994, by and between VAXCEL, INC., a Delaware corporation ("Vaxcel") and
PAUL J. WILSON (the '"Executive") to amend the Employment Agreement between
Vaxcel and the Executive, dated August 16, 1993 (dated August 16, 1993 (the
"Employment Agreement").
RECITALS
WHEREAS, pursuant to the Employment Agreement, the Executive is
employed as President and Chief Executive Officer of Vaxcel, and Vaxcel and the
Executive wish to amend and clarify certain terms of the Employment Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Section 1.01 is hereby amended to read in its entirety as follows
"1.10 Term. Vaxcel hereby employs the Executive subject to the
terms and conditions hereto, and the Executive accepts such employment with
Vaxcel for a term (the "Term") beginning on August 16, 1993 (the "Effective
Date") and ending on the fifth anniversary of the Effective Date, unless
terminated earlier in accordance with Article IV hereof. Vaxcel will, in good
faith, consider an extension of this agreement upon mutually acceptable terms at
the end of the Term."
2. Section 2.01 is hereby amended to read in its entirety as follows:
"2.01 Cash Compensation. As total cash compensation for his
services rendered during the Term, Vaxcel shall pay the Executive an annual
salary of $175,000 for the first 12 months during the Term, $187,000 for the
second 12 months during the Term, $200,000 for the third 12 months during the
Term, $214,000 for the fourth 12 months during the Term and $229,000 for the
fifth 12 months during the Term, payable in equal monthly installments. The
Executive will not be eligible to receive or be considered for cash bonuses
during the first, second or third 12-month periods during the Term, it being
understood and acknowledged by the Executive that the foregoing cash
compensation includes an allowance for bonuses for such periods."
3. Section 2.02 is hereby amended to read in its entirety as follows:
"2.02 Stock Options. Vaxcel has granted to the Executive,
subject to his execution of this Agreement, options under its 1993 Stock Option
Plan to purchase up to 500,000 shares of Common Stock of Vaxcel ("Vaxcel
Shares") at exercise prices of (1)
<PAGE> 2
$1.75 per share for the Category I, Category II and Category III Options (as
defined below) and (2) $2.25 per share for the Category IV Options (as defined
below) and otherwise in the form of Exhibit A hereto (collectively, the
"Executive Options"). The Executive Options will vest and be exercisable,
subject to the provisions of Article IV, as follows:
(a) Category I Options. Options to purchase up to 120,000
Vaxcel Shares (the "Category I Options") will vest according to the following
schedule:
(i) 40,000 to vest on the first anniversary of the Effective
Date;
(ii) 40,000 to vest on the second anniversary of the Effective
Date; and
(iii) 40,000 to vest on the third anniversary of the Effective
Date; and
(b) Category II Options. Options to purchase up to 225,000
Vaxcel Shares (the "Category II Options") will vest when and if any of the
following occur during the term of the Executive's employment with Vaxcel (even
if such event occurs during the Executive's employment with Vaxcel after the
Term):
(i) 65,000 to vest when Vaxcel consummates any equity
financing or financings which in the aggregate provide the
first $5,000,000 in net proceeds to Vaxcel;
(ii) 40,000 to vest when Vaxcel consummates any equity
financing or financings which in the aggregate provide the
next $15,000,000 in net proceeds to Vaxcel;
(iii) 40,000 to vest when Vaxcel achieves $1,000,000 in
Titermax(R) sales in any 12-month period;
(iv) 40,000 to vest upon the successful completion by Vaxcel
of the first significant development and commercialization
agreement with a major corporate vaccine partner related to a
product under the Optivax(TM) License Agreement or any other
product, as determined by the Vaxcel Board of Directors;
(v) 40,000 to vest upon the successful completion by Vaxcel of
the second significant development and commercialization
agreement with a major corporate vaccine partner related to an
Optivax(TM) product or any other product, as determined by the
Vaxcel Board of Directors; and,
(vi) notwithstanding the terms set forth above, all options
specified in (i), (ii), (iii) and (v) vest immediately upon
the consummation of an initial public offering by Vaxcel, if
at the time of such initial public offering, the
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<PAGE> 3
pre-offering value of Vaxcel on a fully-diluted basis,
calculated using the actual price to the public in the
offering, is equal to or greater than $40 million.
For purposes of this Agreement, "Net Proceeds" means gross proceeds from the
sale of securities less any expenses, fees and underwriting discounts incurred
in connection with the financing;
(c) Category III Options. Options to purchase up to 55,000
Vaxcel Shares (the "Category III Options") will vest if the price of Vaxcel
Common Stock reaches or exceeds an average of $8.00 per share, subject to
proportionate adjustment for stock splits and similar occurrences, during any 20
consecutive trading days during the term of the Executive's employment with
Vaxcel (even if such event occurs during the Executive's employment with Vaxcel
after the Term).
(d) Category IV Options. Options to purchase up to 100,000
Vaxcel Shares (the "Category IV Options") will vest according to the following
schedule or, in the case of (iii), when and if the specified event occurs during
the term of the Executive's employment with Vaxcel (even if such event occurs
during the Executive's employment with Vaxcel after the Term):
(i) 35,000 to vest on the fourth anniversary of the Effective
Date;
(ii) 35,000 to vest on the fifth anniversary of the Effective
Date; and
(iii) 30,000 to vest if Vaxcel or its collaborator submits to
the U.S. Food and Drug Administration a Product License
Application for any Vaxcel product.
5. Section 4.04 is hereby amended to read in its entirety as follows:
"4.04 Severance During Term. If the Executive's employment is
terminated by Vaxcel prior to the expiration of the Term, the Executive shall be
entitled to receive the following amount as severance:
(i) An amount equal to three month's salary (at the
then-current salary rate), if the Executive's employment is
terminated under Section 4.01(ii), and an amount equal to one
month's salary (at the then-current salary rate), if the
Executive's employment is terminated for any other reason
under Section 4.01;
(ii) An amount equal to six month's salary, if the Executive
employment is terminated by reason of the Executive's death or
disability under Section 4.02;
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<PAGE> 4
(iii) An amount equal to the cash compensation payable to the
Executive for the remainder of the initial 36-month period of
the Term, if the Executive's employment is terminated by
Vaxcel without cause under Section 4.03 hereof during the
initial 36-month period of the Term, provided however, that in
no event shall the Executive receive less than 12 months of
salary at the then-current salary rate; or
(iv) An amount equal to 12 months of salary at the
then-current salary rate, if the Executive's employment is
terminated by Vaxcel without cause under Section 4.03 hereof
during the fourth or fifth 12-month period of the Term.
6. Section 4.07 is hereby amended to read in its entirety as follows:
"4.07 Effect of Termination on Executive Options.
(a) If the Executive's employment is terminated by Vaxcel for
cause under Section 4.01, all Executive Options shall cease vesting as of the
effective date of termination, and shall remain exercisable for a period of
ninety (90) days after such termination (the "Expiration Date"). If the
Executive Options are not exercised prior to the Expiration Date, they will be
canceled.
(b) If the Executive's employment is terminated during the
Term for any reason (except termination for cause under Section 4.01), the
portion of the Category I and Category IV Options that would have vested at the
next subsequent anniversary will accelerate and become vested immediately.
(c) All vested Category I, Category II, Category III and
Category IV Options will remain exercisable for ninety (90) days after the
effective date of termination of the Executive's employment.
(d) If the Executive's employment is terminated during the
Term for any reason (except termination for cause under Section 4.01), and any
of the milestones (other than anniversary vesting) set forth for the Category
II, Category III or Category IV Options are achieved by Vaxcel within 12 months
after the effective date of the termination of the Executive's employment, the
portion of such options that would have vested under such terms will vest as of
the date of such event and will remain exercisable for ninety (90) days after
the vesting date."
7. Effect of Amendment. This Amendment shall become effective as of the
date and year stated above. Except as expressly amended or modified herein, all
of the terms and conditions of the Employment Agreement shall continue in full
force and effect. Vaxcel and the Executive may prepare and execute a new
document which restates the Employment Agreement, after giving effect to the
terms contained in this Amendment.
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<PAGE> 5
8. Entire Agreement. The Employment Agreement, is amended by this
Amendment, contains the entire agreement between the parties pertaining to the
subject matter hereof and supersedes all prior oral or written agreements
between the parties with respect to such matters.
9. Counterparts. This Amendment shall become binding when any one or
more counterparts hereof, individually or taken together, shall bear the
signatures of each of the parties hereto. This Amendment may be executed in any
number of counterparts, each of which shall be an original as against any party
whose signature appears therein, but all of which together shall constitute but
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
VAXEL, INC. EXECUTIVE
By: _______________________________ ________________________________________
Jack J. Luchese Paul J. Wilson
Chairman of the Board of
Directors
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<PAGE> 1
EXHIBIT 10.7
AMENDMENT NO 1 TO NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AMENDMENT No. 1 to Non-Qualified Stock Option Agreement (this
"Amendment") is made this ___ day of November, 1996, by and between Vaxcel,
Inc., a Delaware corporation (the "Corporation") and Paul J. Wilson
("Employee").
WHEREAS, the Corporation and Employee are parties to that certain Non-
Qualified Stock Option Agreement, dated as of August 16, 1993, and identified as
No. 9393-1 (the "Agreement"), pursuant to which Employee has the right to
purchase up to 500,000 shares of the common stock of the Corporation (the
"Option"); and
WHEREAS, the Corporation and Employee desire to amend the Agreement (i)
to reduce the purchase price of the Options, and (ii) to change the vesting
schedule described in Paragraph 3 of the Agreement;
NOW, THEREFORE, in consideration of the premises, it is agreed by and
between the parties as follows:
A. Paragraph 2 of the Agreement is hereby deleted in its entirety and
the following is hereby substituted in lieu thereof:
2. Purchase Price. The purchase price of each of the shares
covered by the Option shall be $1.50 for the Category I, II and III
Options as provided in Paragraph 3 below.
B. Paragraph 3 of the Agreement is hereby deleted in its entirety and
the following is hereby substituted in lieu thereof:
3. Time of Exercise of Option. The Option, until the
termination thereof as provided in Paragraph 5 below, may be exercised
by Employee according to the following schedule:
(a) Category I Options: Options to purchase up to
175,000 shares will vest as follows: (i) 40,000 of the Category I
Options shall be exercisable after the Employee has been employed for
one full year from August 16, 1993; (ii) an additional 40,000 of the
Category I Options shall be exercisable after the Employee has been
employed for two years from August 16, 1993; (iii) an additional 40,000
of the Category I Options shall be exercisable after the Employee has
been employed for three years from August 16, 1993; (iv) an additional
35,000 of the Category I Options shall be exercisable after the
Employee has been employed for four years from August 16, 1993; and (v)
the final 20,000 of the Category I Options shall be exercisable after
the Employee has been employed for five years from August 16, 1993.
<PAGE> 2
(b) Category II Options: Options to purchase up to
150,000 shares shall become exercisable upon entry by the Corporation
into a sublicense agreement with any Category A or Category B vaccine
company identified on Appendix 1 hereto (40,000 shares for each
sublicense agreement with any such Category A vaccine company and
20,000 shares each for up to four sublicense agreements with any such
Category B vaccine company).
(c) Category III Options: Options to purchase up to
175,000 shares shall become exercisable when and if the specified event
occurs: (i) 25,000 of the Category III Options shall become exercisable
upon consummation of amendments to the SRI/UAB license agreement in a
form acceptable to the Board of Directors of the Corporation; (ii)
30,000 of the Category III Options shall become exercisable upon each
consummation (up to three, for a total of 90,000 Options) of a
public/private offering of stock of the Corporation for $20 million or
more which results in new cash raised for the Corporation and/or
redistribution of shares held among current shareholders of the
Corporation so as to create a more balanced ownership profile, as
determined by the Board of Directors of the Corporation; and (iii)
15,000 of the Category III Options shall become exercisable if the
market capitalization of the Corporation, based on shares outstanding
for 20 consecutive days during the term of the Employee's employment
with the Corporation ("Market Capitalization"), reaches or exceeds $65
million; (iv) 30,000 of the Category III Options shall become
exercisable if the Market Capitalization reaches or exceeds $100
million; and (v) 15,000 of the Category III Options shall become
exercisable if the Market Capitalization reaches or exceeds $135
million.
Subject to the foregoing limitation, Employee may
exercise the Option to Purchase all the shares granted by this Option
at one time or Employee may purchase a portion of the shares granted by
this Option from time to time, until the termination thereof as
provided in paragraph 5 below.
C. Paragraph 5 of the Agreement is hereby deleted in its entirety and
the following is hereby substituted in lieu thereof:
5. Acceleration and Termination of Options.
(a) If Employee's employment is terminated by the
Corporation for cause under Section 4.01 of his Employment Agreement
with the Corporation, the Option will cease vesting as of the effective
date of termination.
(b) If Employee's employment is terminated for any
reason (except termination for cause under Section 4.01 of his
Employment Agreement), the portion of the Category I Options that would
have vested at the next subsequent anniversary will accelerate and
become vested immediately.
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<PAGE> 3
(c) If Employee's employment is terminated for any
reason (except termination for cause under Section 4.01 of his
Employment Agreement), and any of the milestones set forth for the
Category II or Category III Options are achieved by the Corporation
within twelve (12) months after the effective date of the termination
of Employee's employment, the portion of such Category II or Category
III Options that would have vested under such terms will vest as of the
date of such event.
(d) The Option, to the extent not theretofore
exercised, shall remain exercisable for the periods specified below and
shall automatically terminate upon the first to occur of the following
dates:
(i) if Employee's termination of employment occurs
for any reason other than his death or his permanent and total
disability (within the meaning of Section 22(e)(3) of the
Code), then (A) all Category I, Category II and Category III
Options that are vested on the date on which Employee's
employment by the Corporation is terminated will remain
exercisable for ninety (90) days after the effective date of
termination of Employee's employment and will automatically
terminate at the end of such ninetieth (90th) day, and (B) any
Category II or Category III Options that become exercisable
during the 12-month period described in Paragraph 5(c) above,
will remain exercisable for ninety (90) days after the date on
which such Options first become vested and will automatically
terminate at the end of such ninetieth (90th) day;
(ii) if Employee's termination of employment occurs
by reason of his permanent and total disability (within the
meaning of Section 22(e)(3) of the Code), then (A) all
Category I, Category II and Category III Options that are
vested on the date on which Employee's employment by the
Corporation is terminated will remain exercisable for twelve
(12) months after the effective date of termination of
Employee's employment and will automatically terminate at the
end of the last day of such 12-month period, and (B) any
Category II or Category III Options that become exercisable
during the 12-month period described in Paragraph 5(c) above,
will remain exercisable for ninety (90) days after the date on
which such Options first become vested and will automatically
terminate at the end of such ninetieth (90th) day;
(iii) if Employee's termination of employment occurs
by reason of his death, then (A) all Category I, Category II
and Category III Options that are vested on the date of death
will remain exercisable for a period of one hundred eighty
(180) days by the transferee of said Option (or any
unexercised portion thereof) pursuant to Employee's Will or
the law of descent and distribution, and such Options will
automatically terminate at the end of such one hundred
eightieth (180th) day, and (B) any Category II
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<PAGE> 4
or Category III Options that become exercisable during the
12-month period described in Paragraph 5(c) above, will remain
exercisable for ninety (90) days after the date on which such
Options first become vested and will automatically terminate
at the end of such ninetieth (90th) day; and
(iv) all Options shall automatically terminate at the
end of the day which is ten (10) years and one (1) day
following the Date of Grant.
D. Paragraph 7 of the Agreement is hereby amended by adding the
following words immediately following the words "directly or indirectly," in
clause (iii) of the first sentence thereof: "in any transaction or series of
transactions that has not been approved by the Board".
E. The references in Paragraph 8 of the Agreement to "Paragraph 5(c)"
are hereby changed to "Paragraph 5(d)".
F. This Amendment shall become effective as of the day and year first
above written. Except as expressly amended or modified herein, all of the terms
and conditions of the Agreement shall continue in full force and effect.
(signatures on following page)
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<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed on the day and year first above written.
VAXCEL, INC.
By:
------------------------------
Chairman of the Board
(CORPORATE SEAL) Attest:
------------------------------
Secretary
------------------------------
Paul J. Wilson
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<PAGE> 1
EXHIBIT 10.8
FACILITIES USE AGREEMENT
This FACILITIES USE AGREEMENT (the "Agreement") is executed as of
October 16, 1996 ("Effective Date") by and between PROCEUTICS, INC., a Delaware
corporation ("Proceutics"), and VAXCEL, INC., a Delaware corporation ("Vaxcel").
WITNESSETH:
WHEREAS, Vaxcel is occupying a portion of Proceutics' vivarium and
laboratory space under the terms and conditions set forth in a Facilities Use
Agreement dated as of January 1, 1996 (the "Original Agreement");
WHEREAS, Vaxcel desires to continue to utilize a portion of Proceutics'
vivarium and laboratory facilities and Proceutics desires to continue to permit
Vaxcel to utilize such premises on the terms and conditions hereinafter set
forth; and
WHEREAS, the parties wish to formally evidence their understandings and
arrangements with respect to the facilities to be provided by Proceutics.
NOW THEREFORE, the parties hereto, in consideration of their mutual
covenants and intending to be legally bound, hereby agree as follows:
1. Vivarium Facility
1.1 Proceutics agrees to reserve and make available to Vaxcel
approximately two-thirds of its vivarium facility located at 150 Technology
Parkway, Norcross, Georgia to include two of three 300 square foot animal rooms,
together with the necessary support areas for animal manipulation, cage washing,
storage of related supplies, etc. The third 300 square foot animal room will be
designated by the parties for animal manipulation. Proceutics agrees to provide
Vaxcel reasonable access to the facility and Vaxcel agrees to comply with
Proceutics' standard operating procedures regarding access to the facility.
1.2 In consideration of the facility made available for use by Vaxcel,
Vaxcel agrees to pay Proceutics a monthly fee payable upon the first day of each
month. The 1996 monthly fee for use of this vivarium facility shall be $2,000.00
and shall increase to $3,250.00 per month effective January 1, 1997 based on the
assumptions and formula attached as Exhibit A. Unless this Agreement is
terminated sooner in accordance with Section 4, the 1997 monthly fee shall
automatically increase or decrease as of January 1 for each succeeding year
based on the percent change up or
<PAGE> 2
down in the Producer Price Index (PPI) as reported by the U.S. Department of
Labor over the immediately preceding twelve months ("the PPI Change Percent").
The initial base year for this price adjustment shall be 1997. The monthly fee
shall be adjusted as follows: The monthly fee multiplied by the PPI Change
Percent equals the amount of change in the monthly fee ("the Adjustment
Amount"). Where the PPI has increased, the Adjustment Amount shall be added to
the monthly fee; where the PPI has decreased, the Adjustment Amount shall be
subtracted from the monthly fee.
1.3 The parties agree that Vaxcel may occupy less vivarium space in the
facility if Vaxcel's planned volume of animal experiments decreases. The minimum
space to be occupied by Vaxcel shall be one-third of the vivarium facility,
together with the necessary support areas for animal manipulation, cage washing,
storage of related supplies, etc. The monthly fee for occupying the minimum
space shall be $2,000.00 in 1997 as outlined on Exhibit A and such monthly fee
shall be subject to PPI Change Percent per Section 1.2. Vaxcel must give
Proceutics three (3) months written notice of its intention to occupy less
vivarium space.
1.4 Prior to the implementation of any significant changes to the
overall vivarium facility, Proceutics will review such proposed changes with
Vaxcel. Proceutics will give reasonable consideration to Vaxcel's comments
regarding Proceutics' proposed changes and agrees not to implement any changes
which would harm the integrity of Vaxcel's vivarium facility.
1.5 Vaxcel will be responsible for all direct costs associated with the
conduct of experiments and the purchase and housing of animals for Vaxcel's use.
The parties agree to determine the most appropriate method of ordering and
billing of animals and related supplies. Any direct costs incurred by Proceutics
related to Vaxcel experiments will be billed by Proceutics to Vaxcel.
2. Laboratory Facility
2.1 Proceutics agrees to reserve and make available to Vaxcel the 570
square foot laboratory facility (Room #135) and the office adjacent to the
laboratory (Room #134) located at 150 Technology Parkway, Norcross, Georgia.
Proceutics agrees to provide Vaxcel reasonable access to the facility and Vaxcel
agrees to comply with Proceutics' standard operating procedures regarding access
to the facility.
2.2 In consideration of the facility made available for use by Vaxcel,
Vaxcel agrees to pay Proceutics a monthly fee payable upon the first day of each
month. The 1996 monthly fee for this laboratory facility shall be $1,425.00.
Unless this Agreement is terminated sooner in accordance with Section 4, the
1996 monthly fee shall automatically increase or decrease as of January 1 for
each succeeding year based
2
<PAGE> 3
on the percent change up or down in the Producer Price Index (PPI) as reported
by the U.S. Department of Labor over the immediately preceding twelve months
("the PPI Change Percent"). The monthly fee shall be adjusted as follows: The
monthly fee multiplied by the PPI Change Percent equals the amount of change in
the monthly fee ("the Adjustment Amount"). Where the PPI has increased, the
Adjustment Amount shall be added to the monthly fee; where the PPI has
decreased, the Adjustment Amount shall be subtracted from the monthly fee.
2.3 Vaxcel will be responsible for all direct costs associated with the
conduct of experiments in the laboratory. The parties agree to determine the
most appropriate method of ordering and billing laboratory supplies. Any direct
costs incurred by Proceutics related to Vaxcel experiments will be billed by
Proceutics to Vaxcel.
3. Services by Proceutics
3.1 In consideration of the monthly fees, Proceutics will provide
general management and maintenance of the facility consistent with prevailing
applicable guidelines and regulations.
3.2 The monthly fees paid by Vaxcel shall include all utilities, taxes,
depreciation, maintenance, basic phone service, veterinarian's services, and
reasonable usage of copy machines, warehouse, conference rooms, and other common
areas.
Out-of-pocket expenditures, such as long distance charges,
Fedx's, and supplies, shall be paid directly by Vaxcel. All services associated
with the conduct of experiments shall be conducted by Vaxcel personnel and all
expendable supplies will be provided by Vaxcel. Proceutics will not be expected
to provide any laboratory testing support (personnel or equipment).
3.2 Nothing herein shall be construed to require Proceutics to provide
any services under the Agreement which cannot reasonably be provided by
Proceutics' staff or which adversely affects the conduct of Proceutics'
business.
4. Term and Termination
4.1 The Agreement shall commence on the Effective Date and shall
continue in force unless terminated sooner by either party.
3
<PAGE> 4
4.2 The Agreement may be terminated by either party upon twelve (12)
months written notice. The Agreement shall automatically be terminated in the
event of bankruptcy or insolvency of either party.
5. Miscellaneous
5.1 For purposes of the Agreement and all services to be provided
hereunder, Proceutics shall not be considered a partner, co-venturer, agent,
employee or representative of Vaxcel, but shall remain in all respects an
independent contractor. Neither party shall have any right or authority to make
or undertake any promise, warranty, or representation, to execute any contract,
or otherwise to assume any obligation or responsibility in the name of or on
behalf of the other party, except to the extent specifically authorized herein
or in writing by the other party.
5.2 Proceutics shall have no liability for claims, liabilities, losses,
damages or expenses except such as are determined by final and nonappealable
judgment of a court of competent jurisdiction to result primarily from
Proceutics' gross negligence or bad faith in providing a service hereunder. In
such event, Vaxcel's remedy shall be limited to a refund of the amounts paid to
Proceutics for such service.
5.3 Vaxcel will indemnify and hold harmless Proceutics, its affiliates
and the representative directors, officers, agents and employees of Proceutics
and its affiliates from and against any claims, actions, proceedings, demands,
liabilities, damages, judgments, assessments, losses and costs arising out of or
in connection with the services rendered by Proceutics under the Agreement.
Vaxcel will not, however, be responsible for any claims, liabilities, losses,
damages or expenses that are determined by final and nonappealable judgment of a
court of competent jurisdiction to result primarily from Proceutics' gross
negligence or bad faith.
5.4 Nothing herein shall be construed to relieve the directors or
officers of Vaxcel from the performance of their respective duties or limit the
exercise of their powers in accordance with the Certificate of Incorporation or
By-Laws of Vaxcel, any applicable provisions of the Business Corporation Law of
the State of Delaware, or otherwise. The activities of Vaxcel shall at all times
be subject to the control and direction of its Board of Directors and Officers.
5.5 Any notice authorized or required to be given hereunder shall be
sufficiently and satisfactorily given if the same is in writing or confirmed in
writing and is delivered or mailed, first class, postage prepaid, addressed to
either party at its address specified from time to time.
4
<PAGE> 5
5.6 The Agreement shall be governed by the laws of the State of
Delaware. No amendment or modification of the Agreement shall be effective
unless in writing and signed by the parties hereto. The Agreement shall not be
assignable by Vaxcel without the written consent of Proceutics. Subject to the
foregoing, the Agreement shall be binding upon the successors and assigns of
each party.
5.7 The spirit of the Agreement is that both parties will make every
effort to reside in harmony in the facilities including, but not limited to, the
following: (a) bulk purchasing of supplies; (b) Vaxcel giving fair consideration
to Proceutics for subcontract work; (c) reasonable sharing of equipment; and (d)
routine communication regarding each company's strategic plans.
5.8 The Agreement sets forth and constitutes the entire agreement
between the parties with respect to the subject matters and supersedes any and
all prior agreements, understandings, promises, and representations made by
either party to the other concerning the subject matter hereof and the terms
applicable hereto. The Agreement may not be released, discharged, amended, or
modified in any manner except by an instrument in writing signed by duly
authorized representatives of Vaxcel and Proceutics.
IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed by an officer thereunto duly authorized as of the date first above
written.
PROCEUTICS, INC.
By: /s/ [signature illegible]
-----------------------------
VAXCEL, INC.
By: /s/ [signature illegible]
-----------------------------
5
<PAGE> 6
EXHIBIT A
ASSUMPTIONS AND FORMULA FOR
VAXCEL'S MONTHLY VIVARIUM COST
ASSUMING VAXCEL OCCUPIES TWO-THIRDS
OF THE VIVARIUM SPACE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ELEMENT OF EXPENSE MONTHLY COST ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
Rent $1,500.00 $600 sq. ft. X $30 / sq. ft. facility
plus necessary support areas
- --------------------------------------------------------------------------------
Depreciation $1,100.00 Two-thirds of yearly depreciation of
approximately $20,000
- --------------------------------------------------------------------------------
Veterinarian $ 650.00 75% of veterinarian's effort
- --------------------------------------------------------------------------------
Monthly Total $3,250.00
- --------------------------------------------------------------------------------
</TABLE>
ASSUMPTIONS AND FORMULA FOR
VAXCEL'S MONTHLY VIVARIUM COST
ASSUMING VAXCEL OCCUPIES ONE-THIRD
OF THE VIVARIUM SPACE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ELEMENT OF EXPENSE MONTHLY COST ASSUMPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
Rent $ 750.00 $300 sq. ft. X $30 / sq. ft. facility
plus necessary support areas
- --------------------------------------------------------------------------------
Depreciation $ 600.00 One-third of yearly depreciation of
approximately $20,000
- --------------------------------------------------------------------------------
Veterinarian $ 650.00 75% of veterinarian's effort
- --------------------------------------------------------------------------------
Monthly Total $2,000.00
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 1
EXHIBIT 10.9
FEASIBILITY EVALUATION/DEVELOPMENT OPTION AGREEMENT
This FEASIBILITY EVALUATION/DEVELOPMENT OPTION AGREEMENT, ("Agreement") is
entered into this 4th day of August, 1995, by and between VAXCEL, INC., having
its offices at 3000 Northwoods Parkway, Suite 200, Norcross, GA 30071 ("VAXCEL")
and CONNAUGHT LABORATORIES, INC., having its offices at P.O. Box 187, Rt. 611,
Swiftwater, PA 18370 ("CLI").
RECITALS
A. VAXCEL and CLI have entered into discussions with respect to the
development of human vaccines utilizing antigen and vaccine development
technology of CLI and adjuvant technology of VAXCEL, and have signed a
Confidential Disclosure Agreement dated December 15, 1994 ("Confidentiality
Agreement") in that regard.
B. The parties wish to evaluate the feasibility of enhanced immune
responses to CLI's Antigen (as defined in Section 1.2) in VAXCEL's Optivax
System (as defined in Section 1.6). Following successful feasibility evaluation,
negotiation of definitive license and supply agreement covering the further
development, manufacture, and marketing of VAXCEL's Optivax System with CLI's
Antigen in a final vaccine formulation will be conducted.
NOW, THEREFORE, VAXCEL and CLI, in consideration of their mutual promises and
intending to be legally bound, do hereby agree that the following terms and
conditions shall govern the interim relationship between the parties:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have
the respective meanings set forth below:
1
<PAGE> 2
1.1 "Affiliate" shall mean a corporation or any other entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the designated party, but only
for so long as the relationship exists. "Control" shall mean ownership of shares
of stock having at least fifty percent (50%) of the voting power entitled to
vote for the election of directors in the case of a corporation, and at least
fifty percent (50%) of the interests in profits in the case of a business entity
other than a corporation, or, in either case, the maximum allowed by law if less
than fifty percent (50%), on a country-by country basis, of the voting power or
percentage interest in profits.
1.2 "Antigen" shall mean CLI's recombinant lipidated outer surface
protein A (OspA) from Borrelia burgdorferi, the causative agent of Lyme Disease,
provided by CLI for the Program.
1.3 "Confidential Information" shall mean (i) in the case of CLI,
Technical Information concerning the Antigen as such (or the use or manufacture
thereof, except in the Product or with the Optivax System) owned by or licensed
to CLI prior to the date hereof or developed by CLI after the date hereof
outside the Program, and (ii) in the case of VAXCEL, Technical Information
concerning the Copolymer and/or Optivax System (or the use or manufacture
thereof exclusive of Antigen or its use in the Product), or otherwise useful to
the Program, owned by or licensed to VAXCEL prior to the date hereof or
developed by VAXCEL or its licensors after the date hereof outside the Program.
By way of illustration, but not limitation, Confidential Information may include
patents, patent applications, formulations, know-how, manufacturing processes,
inventions, products, processes, methods, techniques, formulas, compositions,
compounds, projects, plans, research or clinical data, development plans,
customers, suppliers, investors, etc.
1.4 "Copolymer" shall mean the polyoxyethylene/polyoxypropylene
copolymer adjuvant designated by VAXCEL as CRL-1005.
1.5 "Development Costs" shall mean the costs of the Program as incurred
by CLI and VAXCEL in conducting the Work Plan under this Agreement and
determined in accordance with Exhibit B hereof.
2
<PAGE> 3
1.6 "Optivax System" shall mean any technology or know-how which
utilizes, is based on or arises out of the use of the Copolymer or that uses
VAXCEL Technical Information. The term "System" shall include anything
incorporated in or used in conjunction with the Product, other than the Antigen,
which affects or may affect the stability, pharmacokinetics, pharmacodynamics or
absorption of Antigen. For this Agreement, the route of administration is by
parenteral injection.
1.7 "Product" shall mean the vaccine in which Antigen is incorporated
in or combined with VAXCEL Optivax System under the Program.
1.8 "Program" shall mean the collaboration between VAXCEL and CLI for
the feasibility evaluation and interim development of Product as provided in
this Agreement, including the work to be conducted by each of the parties as set
forth in the work plan attached as Exhibit A ("Work Plan").
1.9 "Program Information" shall mean any Technical Information
developed or acquired by either party under or in connection with the Program.
Program Information shall include any methods for Product development,
formulation or manufacturing developed for, under or as a result of the Program,
or using or resulting from any Program Information. Program Information shall
not include CLI's or VAXCEL's Confidential Information.
1.10 "Technical Information" shall mean technology and information,
know-how, trade secrets, data, including improvements and modifications to any
thereof, relating to the Antigen, Copolymer, Optivax System, or Product or
otherwise necessary or useful to the Program, which a party hereto has the
lawful and contractual right to disclose to the other party. Technical
Information shall include, without limitation, processes and analytical
methodology used in development, testing, analysis and manufacture, and medical,
clinical, toxicological and other scientific data. Notwithstanding the
foregoing, Technical Information shall not include patents or trademarks.
3
<PAGE> 4
2. PRODUCT DEVELOPMENT PROGRAM
2.1 Upon execution of this Agreement, VAXCEL and CLI shall commence the
Program pursuant to the initial Work Plan attached hereto as Exhibit A. CLI
shall ensure that any Product feasibility evaluation and/or development shall be
performed in accordance with U.S. Food and Drug Administration and cGLP
regulations. Within thirty (30) days following completion of pre-clinical
studies, CLI shall provide VAXCEL with a written report of the results, and such
report and the data shall be deemed Program Information and shall be jointly
owned by CLI and VAXCEL in accordance with Section 3.1.
After completion of the feasibility work contemplated by the
initial Work Plan, VAXCEL and CLI agree to cooperate in devising mutually
agreeable Work Plans and cost estimates for further development of the Product;
such Work Plans may include but are not limited to times for mutual reporting of
results and times when crucial decisions are to be made. Each party agrees to
use its reasonable efforts to review, execute and proceed diligently under the
agreed-upon initial Work Plan and any additional or amended agreed-upon Work
Plans and to report significant deviations therefrom, in a timely fashion. Each
party agrees to revise such Work Plans from time to time so that the Work Plans
may remain a good faith estimate of the work to be done and of Development
Costs. The parties shall participate in periodic conferences to review the
current Work Plan and the status of the Program. These conferences will be held
on an "as needed" basis in the spirit of collaboration, but at least every sixty
(60) days. Notwithstanding the foregoing, (i) all Work Plans, cost estimates and
any major deviations therefrom shall be submitted in writing by the responsible
party for the other party's approval and (ii) neither party shall be required to
perform any work which would result in Development Costs exceeding approved cost
estimates.
2.2 CLI and VAXCEL shall each pay for their respective Development
Costs incurred in the performance of the Work Plan(s) under the Program. The
approved guidelines for their respective Development Costs for both CLI and
VAXCEL are attached hereto as Exhibit B. CLI shall pay Vaxcel a sum of
twenty-five thousand dollars ($25,000) upon signing this Agreement. This payment
is for exclusive rights to evaluate the Product according to the initial Work
Plan and any additional or amended agreed-upon Work Plans.
4
<PAGE> 5
In the event preclinical evaluation of the Product is
successful, based on CLI's sole judgment, CLI will proceed to file an IND and
initiate Phase I clinical trials on a timely basis and will pay VAXCEL a sum of
twenty thousand dollars ($20,000), within thirty (30) days of the filing of an
IND, for exclusive development rights to Product through Phase I clinical
trials.
2.3 Except as specifically authorized by this Agreement, each party
shall, for the term of this Agreement and after its expiration or termination
for any reason, keep confidential and not disclose to others, and use only for
the purposes authorized herein, all of the other party's Confidential
Information and Program Information owned by the other party; provided, however,
that the foregoing obligations shall not apply to the extent that any such
information is:
(i) already known to the other party at the time of
disclosure, as evidenced by such party's written records made prior to
the date of the Confidentiality Agreement; or
(ii) publicly known prior to or after disclosure, other than
through unauthorized acts or omissions of the other party; or
(iii) disclosed in good faith to the other party by a third
party, lawfully and contractually entitled to make such disclosure; or
(iv) the subject of a written consent of the parties which
supplied such information, authorizing disclosure; or
(v) disclosed to a licensee, distributor or agent in
accordance with the Work Plan under a secrecy agreement, provided that
the material provisions of such secrecy agreement as to confidentiality
are the same as those in this Agreement; or
(vi) developed by the recipient independent of information
received, or performed, under this Agreement and evidenced by such
parties written records.
Notwithstanding the foregoing, such information may be (a)
disclosed to government agencies and others where such information may be
required to be included in patent applications or regulatory filings not
prohibited by the terms of this Agreement; or (b) disclosed to the extent
required by applicable laws or regulations or as ordered by a court or other
regulatory body having competent jurisdiction.
5
<PAGE> 6
Notwithstanding anything herein to the contrary, if no further
agreement between the parties is reached, Vaxcel may use or disclose to others
the information in the evaluation report, though not the report itself,
provided: (a) all Confidential Information and Program Information related
solely to the Antigen are deleted (except with respect to which vaccines were
used in the Program); and (b) CLI is not identified by name as the collaborator.
Further, notwithstanding anything herein to the contrary, it is
understood and agreed by the parties that Confidential Information and Program
Information may be disclosed to and used by any Affiliate of the parties
provided such Affiliate is bound by non-use and non-disclosure obligations
consistent with the terms of this Agreement. In each of the foregoing cases, the
other party will use its best efforts to limit the disclosure and maintain
confidentiality to the extent possible.
Further, notwithstanding anything herein to the contrary, it is
understood and agreed by the parties that VAXCEL may make public the existence
of this Agreement, contingent upon CLI's prior written approval of any
publication or announcement revealing the existence of this Agreement.
2.4 If any party desires to publish the results and/or evaluation of the
Program, the publishing party shall provide the non-publishing party a copy of
the manuscript of any proposed publication. The non-publishing party shall then
have thirty (30) days to review and comment on the manuscript, and the
publishing party agrees to delete any information identified by the
non-publishing party as its Confidential Information and/or Program Information.
2.5 CLI shall indemnify, defend and hold harmless VAXCEL, its Affiliates,
employees, directors and agents from and against any and all claims, liability,
loss or expense incurred by any such person which arises out of the Program,
unless such liability is due solely to such person's negligence or misconduct.
VAXCEL shall indemnify, defend and hold harmless CLI, its Affiliates, employees,
directors and agents from and against any and all claims, liability, loss or
expense incurred by any such person which arises from VAXCEL's negligence or
misconduct in its performance and/or obligations under the Program.
2.6 The Antigen by CLI and the Optivax System by VAXCEL are provided for
this Program without warranty of title, noninfringement, merchantability or
fitness for a particular use, purpose, or any other warranty, expressed or
implied.
6
<PAGE> 7
3. OWNERSHIP
3.1 Inventions and Program Information which are conceived, generated
or first reduced to practice by either party or both parties under or as a
result of the Program shall be jointly owned with undivided interest by the
parties ("Joint Inventions"); provided, however, that inventions and Technical
Information shall be: (i) the sole property of CLI, and not deemed to be Joint
Inventions, if and to the extent related to the Antigen itself (exclusive of the
Copolymer and/or Optivax System or its use with the Copolymer and/or Optivax
System or the Product); or (ii) the sole property of VAXCEL, and not deemed to
be Joint Inventions, if and to the extent related to the Copolymer and/or
Optivax System itself (exclusive of the Antigen or its use in the Product). Each
party shall promptly notify the other in writing of all Joint Inventions. Upon
the reasonable request of either party, the other party shall execute any
reasonable document necessary to evidence or confirm the sole property rights of
the other under this Section 3.1. Unless either party provides written notice to
the other party that the invention and/or Program Information relates solely to
the Antigen or Copolymer and/or Optivax System, the inventions and Program
Information shall be considered Joint Inventions. In the event that a party
notifies the other party that it is claiming sole property rights by asserting
that the invention or Program Information are related solely to Antigen or
Copolymer and/or Optivax System, and the other party disagrees with such request
for sole property rights, the parties agree that inventorship shall be
determined in accordance with U.S. law and that ownership shall be determined by
the inventors obligations to assign such property rights. Nothing herein shall
be construed to constitute a grant by CLI of any of its rights with respect to
its Confidential Information and Technical Information (including patent rights
and trademarks) related to the Antigen nor a grant by VAXCEL of any of its
rights with respect to its Confidential Information and Technical Information
(including patent rights and trademarks) related to the Copolymer and/or Optivax
System.
7
<PAGE> 8
3.2 In the event of the expiration or termination for any reason of
this Agreement and if no further definitive agreement with respect to Product
has been executed by the parties, each party shall grant to the other party an
irrevocable, royalty-free, worldwide, non-exclusive license, with the right to
sub-license, to any inventions and Program Information jointly owned by the
parties under Section 3.1 above. Upon the reasonable request of either party,
the other party shall execute any documents to evidence or confirm the foregoing
license. Nothing herein shall be construed to constitute a grant by CLI of any
rights of CLI relating to the Antigen or a grant by VAXCEL of any rights of
VAXCEL relating to the Copolymer an/or Optivax System existing prior to the date
of this Agreement, or developed outside the Program and without reference
thereto or the use of any information therefrom.
3.3 Each party shall have the right, with respect to all inventions and
Program Information jointly owned under Section 3.1 or licensed to it under
Section 3.2 hereof, to disclose and to license such inventions and Program
Information to third parties, provided that such disclosure and/or license shall
not be inconsistent with the terms of this Agreement.
3.4 Both parties or either party shall have the right to decide whether
or not to seek or maintain patent protection in any country on any Joint
Invention; provided, however, that a party shall agree to proceed with patent
prosecution, filing and maintenance for a Joint Invention upon the reasonable
request of the other party. Should a party decide to pursue patent protection,
it shall inform the other party in writing of its intention to do so. The patent
application shall be filed and prosecuted in the names of both parties. In the
event that both parties decide to seek or maintain patent protection, the
following will apply:
(i) CLI shall decide on patent counsel;
(ii) CLI shall consult with VAXCEL regarding preparation,
filing, prosecution and maintenance of such patent applications and
shall furnish VAXCEL with copies of all documents relating thereto in
sufficient time to enable VAXCEL to comment on them prior to filing;
provided, however, that CLI shall make all final decisions; and
(iii) CLI shall pay all out-of-pocket expenses incurred in
filing for, prosecuting and maintaining patents with respect to any
Joint Inventions.
8
<PAGE> 9
VAXCEL shall make available to CLI or its authorized attorneys,
agents, or representatives, such of its employees or consultants whom CLI in its
reasonable judgment deems necessary in order to assist it in obtaining patent
protection for the Joint Inventions. VAXCEL shall sign all legal documents
necessary to file and prosecute patent applications or to obtain or maintain
patents at no charge to VAXCEL.
If at any time, VAXCEL licenses its rights or gains any other
form of economic benefit, including but not limited to, practice of the patent
by VAXCEL, under any patent on any Joint Inventions, it shall: (i) notify CLI of
such action; (ii) reimburse CLI for one-half of all out-of-pocket patent costs
incurred by CLI for any such patent(s) on Joint Invention(s) within forty-five
(45) days of receiving an invoice with accompanying documentation for such costs
from CLI; and (iii) pay for one-half of all subsequent patent maintenance costs
for such patent(s).
4. DEFINITIVE AGREEMENT
Both parties enter this Agreement with the intention of
completing the Program then negotiating definitive license and supply agreements
if, in CLI's sole judgment, the safety and immunogenicity results of the Product
are favorable. Within sixty (60) days after completion of the Program, CLI shall
advise VAXCEL in writing whether CLI wishes to pursue further development of the
Product pursuant to a definitive agreement relating to further development and
subsequent marketing rights. If CLI so notifies VAXCEL, each party agrees to
enter good faith negotiations with the other party for such a definitive
agreement covering the Product. Such good faith negotiations shall be completed
within ninety (90) days after CLI notifies VAXCEL that CLI wishes to pursue
further development of the Product. The following terms are non-binding upon the
parties, but shall serve as guidelines for the terms of the definitive
agreements relating to further development of the Product under which CLI shall
receive world-wide exclusive manufacturing and marketing rights to the Product,
with the right to sub-license, for fifteen years or for the life of any patent
covering the Copolymer and/or Optivax System, on a country by country basis,
whichever is later, further provided that VAXCEL shall supply CLI with the
Copolymer at a fixed supply price, bearing a relationship to cost, not to exceed
twenty dollars and seventy-five cents ($20.75) per gram in 1995 dollars:
9
<PAGE> 10
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
License Issue Fee $ 500,000
- --------------------------------------------------------------------------------
Performance Milestone Payments*
- Beginning of Phase 1I $ 250,000
- Beginning of Phase III $ 250,000
- PLA Filing $ 500,000
- --------------------------------------------------------------------------------
U.S. FDA/CBER Product Approval $1,000,000
Payments
- --------------------------------------------------------------------------------
Per Country Regulatory Approval $ 100,000 (Maximum $500,000)
Payments
- --------------------------------------------------------------------------------
Royalty on Sale 6-8% on Net Sales (to be defined)
- --------------------------------------------------------------------------------
</TABLE>
* If no development milestone is achieved within a 12-month calendar period, CLI
will pay VAXCEL $100,000 provided such payment shall be fully creditable against
the next Performance Milestone Payment.
Further, CLI will be responsible for all further development activities and
costs associated with the Product, including, but not limited to human clinical
testing, laboratory testing, pursuing regulatory approval, final manufacturing,
distribution, and marketing. VAXCEL will provide reasonable technical support to
CLI during further development of the Product as requested by CLI. For any such
work performed by VAXCEL, CLI will pay VAXCEL for any and all reasonable
expenses associated with this effort.
Further, if requested by CLI, VAXCEL will allow the definition of Antigen
contained in this Agreement to be expanded under the license and supply
agreements to include Lyme Disease antigens other than OspA.
5. THIRD PARTY ACTIVITIES
During the Program and for a period of up to sixty (60) days
after completion of the Program, if CLI has notified VAXCEL in writing of CLI's
wish to pursue further development of the Product, to be specifically identified
in such notice, each party agrees to enter into good faith negotiations with the
other party for a definitive agreement covering the further development, and if
successful, the manufacturing and marketing of the Product on such terms and
conditions as the parties shall agree. During such time and during the
additional ninety (90) day period that the parties are negotiating a definitive
agreement, VAXCEL agrees not to conduct any vaccine product development
discussions or activities with any third party related to the Product under the
Work Plan. This additional negotiating period may extend beyond ninety (90) days
by mutual agreement of the parties.
10
<PAGE> 11
6. TERM AND TERMINATION
6.1 This Agreement shall remain in effect until the earlier of (i) two
(2) years from the effective date of this Agreement; or 2) such time as work is
no longer being carried out under the Program in accordance with mutually
approved Work Plans and cost estimates.
6.2 In the event that the Product does not appear viable during
preclinical testing, CLI shall have the option to terminate this Agreement by
written notice to VAXCEL.
6.3 Either party may terminate this Agreement in its sole discretion,
at any time, by giving not less than sixty (60) days prior written notice to the
other party, if the other party is not proceeding diligently with the Program in
accordance with Section 2.1 hereof.
6.4 Either party may terminate this Agreement if the other party has
failed to pay any amount payable hereunder, and such failure is continuing for
thirty (30) days after receiving proper notification of such nonpayment.
6.5 Either party may terminate this Agreement if the parties cannot
successfully negotiate a definitive license and supply agreement within the time
limits outlined in Sections 4 and 5 above.
6.6 Termination of this Agreement shall be without prejudice to either
party's right to receive any and all payments accrued under Section 2.2 prior to
the effective date of the termination. After termination of this Agreement by
either party or in the event of a breach by either party of this Agreement, each
party shall reimburse the other party, within forty five (45) days after
invoice, for any uncancellable obligations and expenses incurred by such party
prior to termination in connection with the Program, and all reasonable costs
incurred by such party in terminating the Program, if the paying party would
have been responsible for such obligations, expenses or costs under Section 2.2
and Exhibit B; provided, however, that no payments for such obligations or
expenses shall be due to the party in breach of this Agreement.
6.7 If this Agreement is terminated by CLI for any reason, VAXCEL shall
be free to license the Optivax System to other third parties for any Lyme
Disease antigens other than the Antigen.
11
<PAGE> 12
7. MISCELLANEOUS
7.1 This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania and each party submits to the
jurisdiction of any state or federal court of the Commonwealth of Pennsylvania.
7.2 This Agreement shall not be amended or modified except in writing
signed by each of the parties hereto.
7.3 Nothing in this Agreement shall be construed to constitute a grant
to CLI of any rights other than those expressly granted herein. Specifically,
CLI shall not have the right to use: (a) the Copolymer or Optivax System with
antigens other than the Antigen, without VAXCEL's prior written approval; (b)
the Copolymer or Optivax System to immunize individuals for the purpose of
producing antibodies which will subsequently be purified and concentrated to
make a high-titer, human immune globulin for commercial sale; or (c) the
Copolymer or Optivax System in any testing or analysis that would reverse
engineer or otherwise reveal the chemical or structural composition of the
Copolymer or the Optivax System. In addition, VAXCEL shall supply all of CLI's
requirements of the Copolymer and nothing in this Agreement shall be construed
to constitute a grant to CLI the right to manufacture the Copolymer either
directly or through a third party.
7.4 Any notice required or permitted under this Agreement shall be in
writing and addressed as follows:
If to VAXCEL: If to CLI:
Vaxcel, Inc. Connaught Laboratories, Inc.
3000 Northwoods Parkway, Suite 200 P.O. Box 187, Route 611
Norcross, GA 30071 Swiftwater, PA 18370
Attention: President Attention: Vice President
Business Development
All notices given in accordance with this Section 7.4 shall be
deemed to be effective five (5) days after the date of mailing, if mailed by
registered or certified mail, postage prepaid and return receipt requested or,
upon delivery, if delivered by hand. Any party may change its address at which
notice is to be received by written notice provided pursuant to this Section
7.4.
12
<PAGE> 13
7.5 This Agreement, together with the Confidentiality Agreement and the
exhibits hereto, sets forth the entire agreement and understanding between the
parties as to the subject matter hereof and supersedes all agreements and
understandings between the parties with respect to the subject matter, whether
oral or in writing.
7.6 The provisions of Sections 2.3, 2.5, 3.1,3.2, 3.3, 3.4, 5, 6.6,
7.1, 7.7, 7.14 and this Section 7.6 shall survive termination for any reason of
this Agreement.
7.7 All disputes arising in connection with this Agreement shall be
finally settled under the rules of the American Arbitration Association by one
(1) independent arbitrator experienced in the matter at issue and appointed in
accordance with said rules. The place of arbitration shall be New York City, New
York. The Arbitrator shall determine the matters in dispute in accordance with
the laws of the Commonwealth of Pennsylvania. All costs and expenses incurred in
connection with the arbitration (including reasonable attorney fees) shall be
borne by the party against whom the decision is rendered or, if no decision is
rendered, such costs and expenses shall be borne equally by the parties (except
that each party shall pay its own legal fees and expenses). If the arbitrator's
decision is a compromise, the determination of which party or parties bears the
costs and expenses incurred in connection with any such arbitration proceeding
shall be made by the arbitrator on the basis of the arbitrator's assessment of
the relative merits of the parties' positions. Notwithstanding the above, either
party has the right to bring suit in a court of competent jurisdiction against
the other party for (i) any breach of the duties of confidentiality pursuant to
this Agreement or the Confidentiality Agreement, or (ii) any infringement by a
third party of the other party's proprietary rights.
7.8 Except as permitted under Section 2.3, each party agrees not to
disclose to any third party the existence of the arrangements between the
parties contemplated by this Agreement, without the written consent of the other
party.
7.9 The respective rights of the parties hereto may be assigned by each
party to any Affiliate of such party. No other assignment or delegation of the
rights or obligations of either party may be made, without the express written
consent of the other party.
13
<PAGE> 14
7.10 Each party represents and warrants that it has the power and
authority to execute, deliver, and perform its obligations under this Agreement,
and that neither the execution nor delivery of this Agreement nor the
performance of its obligations hereunder will constitute a breach of the terms
or provisions of any contract or violate the rights of any third party.
7.11 No party hereto shall be liable for failure to perform or delay in
performing obligations set forth in this Agreement and no party shall be deemed
in breach of its obligations, if, to the extent and for so long as such failure,
delay, or breach is due to natural disasters or any causes beyond reasonable
control of that party. Any party desiring to invoke this section 7.11 shall
notify the other party promptly of such desire and shall use reasonable efforts
to resume performance of its obligations.
7.12 No waiver of any term or condition of this Agreement shall be
valid except by an instrument in writing expressly waiving such term or
condition signed by the waiving party.
7.13 If any provision of this Agreement is ultimately held to be
invalid, illegal or unenforceable, the validity, legality, and enforceability of
the remaining provisions hereof shall not in any way be affected or impaired
thereby, unless the absence of the invalidated provision materially affects the
substantive rights of the parties hereto.
7.14 Notwithstanding anything to the contrary set forth in this
Agreement, (a) neither party will be liable to the other for any incidental,
special, consequential, punitive, or exemplary damages of any kind and (b) if
arbitration, litigation or other action is commenced between the parties
concerning any dispute arising out of or relating to this Agreement, the
prevailing party in any contested ancillary proceeding related to the action
(e.g., motions to transfer, to compel discovery, etc.) and the prevailing party
in the action itself will be entitled, in addition to any other award that may
be made, to recover all court costs or other official costs and all reasonable
expenses associated with the ancillary proceeding or action, including without
limitation reasonable attorney's fees and expenses.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
VAXCEL, INC. CONNAUGHT LABORATORIES, INC.
By By
--------------------------------- ---------------------------------
Title Title
------------------------------ ------------------------------
15
<PAGE> 16
EXHIBIT A
WORK PLAN
TITLE: EVALUATION OF OspA SPECIFIC ANTIBODY RESPONSES INDUCED USING
FORMULATIONS CONTAINING OPTIVAX ADJUVANT
1. PURPOSE AND LOGIC
A. PURPOSE: To compare immune responses induced using experimental subunit
vaccine formulations based on Connaught's recombinant OspA and containing the
nonionic block copolymer P1005, the Optivax adjuvant. The experimental endpoint
will be the production of specific antibodies that are high titered and
long-lived. Experimental challenge experiments will not be done in this study
but rather in subsequent studies.
B. LOGIC: The Optivax adjuvant system is based on the nonionic block
copolymer, P1005, which can be used in both aqueous and oil-containing vaccine
formulations. The Optivax adjuvant routinely augments immune responses and could
induce additional or different effector mechanisms. Mechanisms of action are not
known but could include:
1. When correctly formulated in aqueous solutions the polymer will form
1-5[mu]m particles in association with the vaccine immunogen. Particulate based
delivery of protein immunogens is known to augment both antibody and cellular
immune responses through depot effects.
2. When Optivax is used in oil-in-water (O/W) emulsions, the emulsion
is stabilized.
3. Particles may preferentially deliver immunogens to phagocytic
macrophages, and potentially to phagocytic immature dendritic cells, which would
increase antigen processing and presentation.
4. Optivax polymer may activate antigen presenting cells directly.
II. TEST REAGENTS, ANIMAL REQUIREMENTS AND TEST GROUP ORGANIZATION
A. IMMUNOGENS AND VACCINE FORMULATIONS:
1. The subunit vaccines will be based on recombinant OspA protein, 0.2
or 2[mu]g/dose in a dose volume of 100[mu]l.
a. Amount of recombinant OspA protein required for the actual
experimental vaccine formulations is 176[mu]g. Because of technical
limitations, a minimum of 500[mu]g will be needed.
16
<PAGE> 17
2. The poloxamer P1005 (Optivax) will be used as the experimental
adjuvant, 2.5-7.5mg/dose.
a. Amount of P1005 polymer required for actual experimental
vaccine formulations is 600mg. Additional material will be available as
needed to address formulation issues.
3. All formulations will be prepared at laboratory scale at Vaxcel.
B. ASSAY PROTEINS OR PEPTIDES:
1. The recombinant OspA will be used to measure antibodies in a
standard ELISA. All serological testing will be done at Connaught.
C. ANIMAL TYPE AND NUMBERS
The initial experiment will require the use of 80 C3H mice, ten mice / group,
eight groups. Mice will be age and gender matched, purchased from a standard
supplier and housed and maintained at the Vaxcel/CytRx animal facility. Mice
will be immunized two times, 21 days between immunizations. All immunizations
will be done using the CytRx facility. The vaccines will be administered by
needle injection, subcutaneously (s.c.) at one site, total volume of
100[mu]l/dose. The groups will be immunized using the following format:
1. Group 1 mice will receive 0.2[mu]g/dose of OspA, without Optivax
adjuvant.
2. Group 2 mice will receive 0.2[mu]g/dose of OspA + 2.5% (2.5mg/dose)
P1005 (Optivax).
3. Group 3 mice will receive 0.2[mu]g/dose of OspA + 5.0% (5.0mg/dose)
P1005 (Optivax).
4. Group 4 mice will receive 0.2[mu]g/dose of OspA + 7.5% (7.5mg/dose)
P1005 (Optivax).
5. Group 5 mice will receive 2[mu]g/dose of OspA, without Optivax
adjuvant.
6. Group 6 mice will receive 2[mu]g/dose of OspA + 2.5% (2.5mg/dose)
P1005 (Optivax).
7. Group 7 mice will receive 2[mu]g/dose of OspA + 5.0% (5.0mg/dose)
P1005 (Optivax).
17
<PAGE> 18
8. Group 8 mice will receive 2[mu]g/dose of OspA + 7.5% (7.5mg/dose)
P1005 (Optivax).
NOTE: The option of giving a third immunization will be considered if
high-titered antibody responses are not raised following the two
immunizations.
III. MEASUREMENT OF ANTIGEN - SPECIFIC IMMUNE RESPONSES
A. ANTIBODY RESPONSES: On the day of the first immunization, day 0, but
prior to the vaccine administration and on days 14 and 35, blood will be
collected from all mice. Sera will be recovered for serological assays,
specifically the measurement of antibody titers by ELISA. Selected antibody
positive samples will be further tested to measure bacterial growth inhibition
activity. Additional blood sampling will be done if needed or if a third
immunization is given.
IV. EXPERIMENTAL SCHEDULE
A. AVAILABILITY OF VACCINE COMPONENTS: The recombinant OspA protein and
the P1005 Optivax polymer are available currently so no delays are anticipated
regarding formulation of experimental OspA vaccines.
B. ANIMALS, PURCHASE, HOUSING AND IMMUNIZATIONS: Capacity for housing 80
mice is currently available and animals were ordered for delivery during the
week of June 26, 1995. One week quarantine at the Vaxcel/CytRx animal facility
was required which means the immunizations were done during the week of July 3,
1995. The 'in-life' animal portion of the experiments will be completed by
August 7, 1995.
C. ANIMAL MATERIALS FOR TESTING: All serum samples will be shipped
together upon completion of the 'in-life' portion of the experiments during the
week of August 7, 1995. Testing schedule, for CLI, to be determined by Dr. John
Mays.
18
<PAGE> 19
EXHIBIT B
GUIDELINES FOR DEVELOPMENT COSTS
LYME DISEASE VACCINE
VAXCEL DEVELOPMENT COSTS
1. VAXCEL will select an appropriate Optivax System formulation(s) as an
adjuvant for the Antigen.
2. VAXCEL will provide CLI with sufficient quantities of Copolymer to
conduct toxicology and other preclinical studies to determine
feasibility.
3. VAXCEL will provide technical support during Product formulation,
manufacturing, preclinical evaluation, IND submission, and Phase I
clinical trials, as requested by CLI.
4. VAXCEL will perform toxicology study on the Copolymer alone in a manner
to support an IND, submit this data to the U.S. Food and Drug
Administration, and allow CLI to access this information for
confidential regulatory purposes.
5. VAXCEL and its current parent, CytRx Corporation, will prepare and
CytRx will submit a Drug Master File on the Copolymer to the U.S. Food
and Drug Administration and allow CLI to access this information for
confidential regulatory purposes.
CLI DEVELOPMENT COSTS
1. CLI will perform all preclinical studies on the Product to determine
feasibility.
2. CLI will perform toxicology and other necessary preclinical studies on
the Product to support an IND
3. CLI will prepare and submit the IND for the Product.
4. CLI will be responsible for all manufacturing of the Product for
preclinical testing and Phase I clinical trials.
5. CLI will pay VAXCEL reasonable expenses for VAXCEL scientific personnel
to assist with formulations and manufacturing, at CLI's facility in
Swiftwater, if necessary.
6. Vaxcel will charge CLI $20.75 per gram for Phase I clinical material.
7. CLI will conduct the Phase I clinical trial on the Product.
19
<PAGE> 20
8. CLI will reimburse VAXCEL for any VAXCEL activities performed under the
Work Plan beyond those specifically described above under "VAXCEL
Development Costs".
20
<PAGE> 1
EXHIBIT 10.10
LEASE
NORTHWOODS BUSINESS CENTER
3000 NORTHWOODS PARKWAY
NORCROSS, GEORGIA
Landlord: New England Mutual Life Insurance Company
Tenant: Vaxcel, Inc.
Date: As of November 23, 1993
This Lease consists of four parts:
Part I Cover Sheet
Part II Standard Lease Provisions
Part III Additional Provisions (if any) and
Part IV Exhibits
EXHIBIT A - Floor Plan of Premises
EXHIBIT B - Legal Description of Lot
EXHIBIT C - Omitted
EXHIBIT D - Tenant Improvements
EXHIBIT E - Omitted
EXHIBIT F - Omitted
EXHIBIT G - List of permitted substances
EXHIBIT H - Expansion Space
Form: Northwoods Business Center
TNE Asset No. 988
TNE Locator t:\Docs\988VXL.TPM
Last Revision date: 11/22/93
<PAGE> 2
PART I
COVER SHEET
The terms listed below shall have the following meanings throughout
this Lease:
DATE OF LEASE: As of November 23, 1993
LANDLORD: New England Mutual Life Insurance Company
TENANT: Vaxcel, Inc., a Georgia corporation
TENANT'S ADDRESS: 3000 Northwoods Parkway, Suite 200
Norcross, Georgia 30071
Attn: Mr. Paul Wilson
Copy to: W. Gregory Null, Esq.
Long Aldridge & Norman
One Peachtree Center, Suite 5300
303 Peachtree Street
Atlanta, Georgia 30308
MANAGING AGENT: LaVista Associates, Inc.
MANAGING AGENT'S 3201 Peachtree Corners Circle
ADDRESS: Norcross, Georgia 30092
PREMISES: The area consisting of approximately 4,782 rentable
square feet located on the first floor of the
Building as shown on Exhibit A attached
BUILDING: The three buildings known as Northwoods Business
Center with a street address of 3000 Northwoods
Parkway, Norcross, Georgia, and consisting of
approximately 110,056 rentable square feet
PROPERTY: The Building, other improvements and land (the
"Lot"), a legal description of which is Exhibit B
attached
TENANT'S 4.34% (4,782 rentable square feet in the Premises
PERCENTAGE: divided by 110,056 rentable square feet in the
Building)
- --------------------- ----------------------
LANDLORD'S INITIALS TENANT'S INITIALS
- 2 -
<PAGE> 3
PERMITTED USES: Office, receiving, storing, shipping and selling
(other than retail) products, materials and
merchandise made and/or distributed by Tenant, and
laboratory and related facilities for Tenant's
research and development of vaccine and vaccine
delivery systems, all consistent with Paragraph 7.2
TENANT See Exhibit D attached hereto and made a part hereof
IMPROVEMENTS:
COMMENCEMENT DATE: See Paragraph 2.1 below
TERM: Five (5) years (plus any extension properly exercised
as provided in Additional Provisions, AP8)
BASE RENT: $181,285.62 payable as follows:
<TABLE>
<CAPTION>
Annual
Rent Annual Rent
Months Per Month Rent p.r.s.f.
-------------------------------------------------------
<S> <C> <C> <C>
1-12 $2,789.50 $33,474.00 $7.00
-------------------------------------------------------
13-24 $2,901.08 $34,812.96 $7.28
-------------------------------------------------------
25-36 $3,106.64 $36,199.74 $7.57
-------------------------------------------------------
37-48 $3,136.19 $37,634.34 $7.87
-------------------------------------------------------
49-60 $3,263.72 $39,164.58 $8.19
-------------------------------------------------------
-------------------------------------------------------
</TABLE>
LANDLORD'S SHARE OF $22,011.20 per real estate tax year
TAXES:
LANDLORD'S SHARE OF $14,230.00 per Lease Year
INSURANCE PREMIUMS:
SECURITY DEPOSIT: $33,474.00
PUBLIC LIABILITY $1,000,000 Combined Single Limit
INSURANCE AMOUNT:
BROKER(S): LaVista Associates, Inc. and Cushman & Wakefield of
Georgia, Inc.
GUARANTOR(S): None
- ----------------------- -----------------------
LANDLORD'S INITIALS TENANT'S INITIALS
- 3 -
<PAGE> 4
TABLE OF CONTENTS OF STANDARD LEASE PROVISIONS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I: PREMISES
1.1 Premises........................................................ 6
1.2 Common Areas.................................................... 6
ARTICLE II: TERM
2.1 Commencement Without Tenant Improvements........................ 7
2.2 Commencement With Tenant Improvements........................... 7
ARTICLE III: RENT
3.1 Base Rent....................................................... 7
3.2 Additional Rent for Operating Expenses, Taxes, and Capital
Costs........................................................... 8
ARTICLE IV: DELIVERY OF PREMISES AND TENANT IMPROVEMENTS
4.1 Condition of Premises........................................... 10
4.2 Delay in Possession............................................. 10
4.3 Delivery and Acceptance of Possession........................... 11
4.4 Early Occupancy................................................. 11
ARTICLE V: ALTERATIONS AND TENANT'S PERSONAL PROPERTY
5.1 Alterations..................................................... 11
5.2 Tenant's Personal Property...................................... 12
ARTICLE VI: LANDLORD'S COVENANTS
6.1 Services Provided by Landlord................................... 13
6.2 Repairs and Maintenance......................................... 13
6.3 Quiet Enjoyment................................................. 14
6.4 Insurance....................................................... 14
ARTICLE VII: TENANT'S COVENANTS
7.1 Repairs, Maintenance and Surrender.............................. 14
7.2 Use............................................................. 14
7.3 Assignment; Sublease............................................ 15
7.4 Indemnity....................................................... 15
7.5 Tenant's Insurance.............................................. 16
7.6 Payment of Taxes................................................ 16
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
7.7 Environmental Assurances........................................ 16
7.8 Americans With Disabilities Act................................. 18
ARTICLE VIII: DEFAULT
8.1 Default......................................................... 18
8.2 Remedies of Landlord and Calculation of Damages................. 19
ARTICLE IX: CASUALTY AND EMINENT DOMAIN
9.1 Casualty........................................................ 20
9.2 Eminent Domain.................................................. 22
ARTICLE X: RIGHTS OF PARTIES HOLDING SENIOR INTERESTS
10.1 Subordination................................................... 22
10.2 Mortgagee's Consent............................................. 23
ARTICLE XI: GENERAL
11.1 Representations by Tenant....................................... 23
11.2 Notices......................................................... 23
11.3 No Waiver or Oral Modification.................................. 23
11.4 Severability.................................................... 23
11.5 Requests by Tenant.............................................. 23
11.6 Estoppel Certificate and Financial Statements................... 23
11.7 Waiver of Liability............................................. 24
11.8 Execution; Prior Agreements and No Representations.............. 24
11.9 Brokers......................................................... 24
11.10 Successors and Assigns.......................................... 24
11.11 Applicable Law and Lease Interpretation......................... 25
11.12 Costs of Collection, Enforcement and Disputes................... 25
11.13 Holdover........................................................ 25
11.14 Force Majeure................................................... 25
11.15 Limitation On Liability......................................... 25
11.16 Lease not to be Recorded........................................ 26
11.17 Security Deposit................................................ 26
11.18 Guaranty of Lease............................................... 26
</TABLE>
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<PAGE> 6
PART II STANDARD LEASE PROVISIONS
ARTICLE I PREMISES
1.1 Premises.
(a) Demise of Premises. This Lease (the "Lease") is made and entered
into by and between Landlord and Tenant and shall become effective as of the
Date of Lease. In consideration of the mutual covenants made herein, Landlord
hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises,
on all of the terms and conditions set forth in this Lease.
(b) Measurement. If, as a result of any subsequent measurement by
Landlord (which measurement shall be completed in accordance with standard
office building measurement practices utilized in the area in which the Building
is located), the areas of the Building or the Premises are determined to be more
or less than the areas described in the Lease, then all computations of rent and
other matters described in the Lease where area is a factor shall be recomputed.
Until Landlord remeasures the Building and the Premises, all measurements of
area contained in the Lease shall be deemed to be correct and binding upon the
Landlord and Tenant. *See Additional Provisions API.
(c) Intentionally Omitted
(d) Access to Premises. Landlord shall have reasonable access to the
Premises, at any time during the Term, to inspect Tenant's performance hereunder
and to perform any acts required of or permitted to Landlord herein, including,
without limitation, (i) the right to make any repairs or replacements Landlord
deems necessary, (ii) the right to show the Premises to prospective purchasers
and mortgagees, and (iii) during the last six (6) months of the Term, the right
to show the Premises to prospective tenants. Landlord shall at all times have a
key to the Premises, and Tenant shall not change any existing lock(s), nor
install any additional lock(s) without Landlord's prior consent. Except in the
case of any emergency, any entry into the Premises by Landlord shall be not less
than 24 hours advance notice.
1.2 Common Areas. Tenant shall have the right to use, in common with
other tenants, the Building's common lobbies, corridors, stairways, and
elevators necessary for access to the Premises, and the common walkways and
driveways necessary for access to the Building, the common toilets, corridors
and elevator lobbies of any multi-tenant floor, if any, and the parking areas
for the Building ("Common Areas"). Tenant's use of the Building parking areas
shall be on an unreserved, non-exclusive basis and solely for Tenant's employees
and visitors. Landlord shall not be liable to Tenant, and this Lease shall not
be affected, if any parking rights of Tenant hereunder are impaired by any law,
ordinance or other governmental regulation imposed after the Date of Lease. If
Landlord grants to any other tenant the exclusive right to use any particular
parking spaces, neither Tenant nor its visitors shall use such spaces. Use of
the Common Areas shall be only upon
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<PAGE> 7
the terms set forth at any time by Landlord. Landlord may at any time and in any
manner make any changes, additions, improvements, repairs or replacements to the
Common Areas that it considers desirable, provided that Landlord shall use
reasonable efforts to minimize interference with Tenant's normal activities.
Such actions of Landlord shall not constitute constructive eviction or give rise
to any rent abatement or liability of Landlord to Tenant and shall use
reasonable efforts to ensure that Tenant and Tenant's invitees shall have access
to the Premises during normal business hours.
ARTICLE II TERM
2.1 Commencement Date*
*See Additional Provisions, AP2
ARTICLE III RENT
3.1 Base Rent.
(a) Payment of Base Rent. Tenant shall pay the Base Rent each month in
advance on the first day of each calendar month during the Term. If the
Commencement Date is other than the first day of the month, Tenant shall pay a
proportionate part of such monthly installment on the Commencement Date. An
adjustment in the Base Rent for the last month of the Term shall be made if the
Term does not end on the last day of the month. All payments shall be made to
Managing Agent at Managing Agent's Address or to such other party or to such
other place as Landlord may designate in writing, without prior demand and
without abatement, deduction or offset except as otherwise set forth herein,
charges to be paid by Tenant hereunder, other than Base Rent, shall be
considered additional rent for the purposes of this Lease, and the words "rent"
or "Rent" as used n this Lease shall mean both Base Rent and additional rent
unless the context specifically or clearly indicates that only Base Rent is
referenced.
(b) Late Payments. Tenant acknowledges that the late payment by Tenant
to Landlord of any rent or other sums due under this Lease will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of such costs
being extremely difficult and impracticable to ascertain. Therefore, if any rent
or other sum due from Tenant is not received when due, Tenant shall pay to
Landlord no later than ten (10) calendar days after such date an additional sum
equal to 5% of such overdue payment. In addition to such late charge, all such
delinquent rent or other sums due to Landlord, including the late charge, shall
bear interest beginning on the date such payment was due at the then maximum
lawful rate permitted to be charged by Landlord. The notice and cure period
provided in Paragraph 8.1(a) does not apply to the foregoing late charges and
interest. If payments of any kind are returned for insufficient funds Tenant
shall pay to Landlord an additional handling charge of $50.00.
- 7 -
<PAGE> 8
3.2 Additional Rent for Operating Expenses, Taxes, and Capital Costs.
(a) Additional Rent. For each Lease Year, Tenant shall pay to Landlord
as additional rent Tenant's Percentage of Operating Expenses, Taxes in excess of
Landlord's Share of Taxes, and Capital Costs ("Tenant's Share of Expenses").
(b) Definitions. As used herein, the following terms shall have the
following meanings:
(i) Lease Year. Each successive 12 month period following
the Commencement Date
(ii) Operating Expenses. The total cost of operation of
the Property, including, without limitation, (1)
premiums in excess of Landlord's Share of Insurance
Premiums and deductibles* for insurance carried with
respect to the Property; (2) all costs of supplies,
materials, equipment, and utilities used in or
related to the operation, maintenance, and repair of
the Property or any part thereof (including
utilities, unless the cost of any utilities is to be
paid for separately by the Tenant pursuant to
Paragraph 6.1 (b)); (3) all labor costs, including
without limitation, salaries,** wages, payroll and
other taxes, unemployment insurance costs, and
employee benefits: (4) all maintenance, management,
janitorial, inspection, legal, accounting, and
service agreement costs related to the operation,
maintenance, and repair of the Property or any part
thereof, including, without limitation, service
contracts with independent contractors. Any of the
above services may be performed by Landlord or its
affiliates, provided that fees for the performance of
such services shall be reasonable and competitive
with fees charged by unaffiliated entities for the
performance of such services in comparable buildings
in the area. Operating Expenses shall not include
Taxes, leasing commissions; repair costs paid by
insurance proceeds or by any tenant or third party;
the initial construction cost of the Building or any
depreciation thereof; any debt service or costs
related to sale or financing of the Property; any
capital expenses, except* tenant improvements
provided for any tenant; or any special services
rendered to tenants (including Tenant) for which a
separate charge is made.** If the Building is less
than 100% occupied during any Lease Year, then in
determining the Operating Expenses, all Operating
Expenses that may reasonably be determined to vary in
accordance with the occupancy level of the Building,
shall be grossed up to reflect 100% occupancy by
multiplying the amount of such expenses by a
fraction, the numerator of which is the total
rentable square feet in the Building and the
denominator of which is the average square feet in
the Building that is occupied by tenants during the
Lease Year. For the purpose of calculating Tenant's
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<PAGE> 9
Percentage of Operating Expenses, Operating Expenses,
excluding insurance costs, shall not increase by more
than 5% annually.
**See Additional Provisions, AP3
*(not to exceed Tenant's Percentage of $25,000.00 per
occurrence)
**for employees at or below the level of
administrative property manager
*as set forth in Paragraph 3.2(b)(vi) below
(v) Taxes. Any form of assessment, rental tax, license
tax, business license tax, levy, charge, tax or
similar imposition imposed by any authority having
the power to tax, including any city, county, state
or federal government, or any school, agricultural,
lighting, library, drainage, or other improvement or
special assessment district, as against the Property
or any part thereof or any legal or equitable
interest of Landlord therein, or against Landlord by
virtue of its interest therein, and any reasonable
costs incurred by Landlord in any proceedings for
abatement thereof, including, without limitation,
attorneys' and consultants' fees, and regardless of
whether any abatement is obtained. Landlord's income
and franchise taxes are excluded from Taxes.
(vi) Capital Costs. The annual cost of any capital
improvements to the Property made by Landlord that
are designed to increase safety, to reduce Operating
Expenses, or to comply with any governmental law or
regulation imposed after initial completion of the
Building, amortized over such period as Landlord
shall reasonably determine, in accordance with sound
accounting principles, consistently applied, together
with a fixed annual interest rate equal to the Prime
Rate plus 2% on the unamortized balance. The Prime
Rate shall be the prime rate published in the Wall
Street Journal on the date the construction is
completed.
(c) Estimate of Tenant's Share of Expenses. Before each calendar year
and from time to time as Landlord deems appropriate, Landlord shall give Tenant
estimates for the coming calendar year of Operating Expenses, Taxes in excess of
Landlord's Share of Taxes, Capital Costs, and Tenant's Share of Expenses.
Landlord shall make reasonable efforts to provide estimates not less than thirty
(30) days before the beginning of each calendar year. Tenant shall pay one
twelfth (1 /12) of the estimated amount of Tenant's Share of Expenses with each
monthly payment of Base Rent during the calendar year. Each calendar year,
Landlord shall give Tenant a statement (the "Share of Expenses Statement")
showing the Operating Expenses, Taxes in excess of Landlord's Share of Taxes,
and Capital Costs for the prior calendar year*, a calculation of Tenant's Share
of Expenses due for the prior Lease Year* and a summary of amounts already paid
by Tenant for the prior calendar year.* Landlord shall make reasonable efforts
to provide the Share
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<PAGE> 10
of Expenses Statement within one hundred and twenty (120) days after the end of
the prior calendar year*. Any underpayment by Tenant shall be paid to Landlord
within thirty (30) days after delivery of the Share of Expenses Statement; any
overpayment shall be credited against the next installment of Base Rent due,
provided that any overpayment shall be paid to Tenant within thirty (30) days if
the Term has ended. No delay by Landlord in providing any Share of Expenses
Statement shall be deemed a waiver of Tenant's obligation to pay Tenant's Share
of Expenses. Notwithstanding anything contained in this paragraph, the total
rent payable by Tenant shall in no event be less than the Base Rent.
(d) Partial Year Calculation.
(i) First Lease Year. In the event the Term did not
commence on January lst, Tenant's Share of Expenses
for the first Lease Year* will be proportionately
reduced. In this case, Tenant shall pay Landlord
Tenant's Share of Expenses multiplied by a fraction
whose numerator equals the number of days between the
Commencement Date and December 31 and whose
denominator equals 365. (For example, if the
Commencement Date is September 1 in the Base Year,
Tenant shall pay in the first calendar year Tenant's
Share of Expenses times 122/365).
(ii) Last Lease Year. In the event the Term does not
expire on December 31st of the last calendar year;*
Tenant's Share of Expenses shall be proportionately
reduced.
ARTICLE IV DELIVERY OF PREMISES AND TENANT IMPROVEMENTS
4.1 Condition of Premises. Landlord shall deliver the Premises to
Tenant in its "as-is" condition. Tenant shall construct tenant improvements
pursuant to and in accordance with the terms set forth in Exhibit D of this
Lease ("Tenant Improvements"). Except as otherwise provided in this lease, such
Tenant Improvements shall become and remain the property of the Landlord.
4.2 Intentionally Omitted.
4.3 Delivery and Acceptance of Possession. Tenant shall accept
possession and enter in good faith occupancy of the entire Premises and commence
the operation of its business therein within thirty (30) days after the
Commencement Date. Tenant's taking possession of any part of the Premises shall
be deemed to be an acceptance and an acknowledgment by Tenant that (i) Tenant
has had an opportunity to conduct, and has conducted, such inspections of the
Premises as it deems necessary to evaluate its condition, (ii) except as
otherwise specifically provided herein, Tenant accepts possession of the
Premises in its then existing condition, "as-is", including all patent and
latent defects, (iii) Tenant Improvements have been completed in accordance with
the terms of
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this Lease, except for defects of which Tenant has given Landlord written notice
prior to the time Tenant takes possession, and (iv) neither Landlord, nor any of
Landlord's agents, has made any oral or written representations or warranties
with respect to such matters other than as set forth in this Lease.
4.4 Early Occupancy. During construction of the Tenant Improvements,
and prior to the Commencement Date, Tenant (and its contractors) may enter the
Premises subject to all of the provisions of this Lease (including Tenant's
obligations regarding indemnity and insurance), except those provisions
regarding Tenant's obligation to pay Rent, which obligation shall commence as
provided in Paragraph 2.1 of this Lease.
ARTICLE V ALTERATIONS AND TENANT'S PERSONAL PROPERTY
5.1 Alterations.
(a) Landlord's Consent. Tenant shall not make any alterations,
additions, installations, substitutes or improvements ("Alterations") in and to
the Premises without first obtaining Landlord's written consent. Landlord shall
not unreasonably withhold or delay its consent; provided, however, that Landlord
shall have no obligation to consent to Alterations of a structural nature or
Alterations that would violate the certificate of occupancy for the Premises or
any applicable law, code or ordinance or the terms of any superior lease or
mortgage affecting the Property. No consent given by Landlord shall be deemed as
a representation or warranty that such Alterations comply with laws, regulations
and rules applicable to the Property ("Laws"). Tenant shall pay Landlord's
reasonable costs of reviewing or inspecting any proposed Alterations and any
other costs that may be incurred by Landlord as a result of such Alterations.
(b) Workmanship. All Alterations shall be done at reasonable
times in a first-class workmanlike manner, by contractors approved by Landlord,
and according to plans and specifications previously approved by Landlord. All
work shall be done in compliance with all Laws, and with all regulations of the
Board of Fire Underwriters or any similar insurance body or bodies. Tenant shall
be solely responsible for the effect of any Alterations on the Building's
structure and systems, notwithstanding that Landlord has consented to the
Alterations, and shall reimburse Landlord on demand for any costs incurred by
Landlord by reason of any faulty work done by Tenant or its contractors. Upon
completion of Alterations, Tenant shall provide Landlord with a complete set of
"as-built" plans.
(c) Mechanics and Other Liens. Tenant shall keep the Property
and Tenant's leasehold interest therein free of any liens or claims of liens,
and shall bond or otherwise discharge to Landlord's satisfaction, any such liens
within ten (10) days of their filing. At Landlord's request, Tenant's contractor
shall provide payment, performance and lien indemnity bonds required by
Landlord, and Tenant shall provide evidence of such insurance as Landlord may
require, naming Landlord as an additional insured. Tenant
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shall indemnify Landlord and hold it harmless from and against any cost, claim,
or liability arising from any work done by or at the direction Tenant.
(d) Removal of Alterations. All Alterations affixed to the
Premises shall become part thereof and remain therein at the end of the Term.
5.2 Tenant's Personal Property.
(a) In General. Tenant may provide and install, and shall
maintain in good condition, all trade fixtures, personal property, equipment,
furniture and moveable partitions required in the conduct of its business in the
Premises. All of Tenant's personal property, trade fixtures, equipment,
furniture, movable partitions, and any Alterations not affixed to the Premises
shall remain Tenant's property. Landlord and Tenant specifically acknowledge and
agree that any and all case work and cabinet work to be installed by Tenant
shall be deemed and construed to be trade fixtures, and may be removed by Tenant
upon the expiration or earlier termination of this Lease and Tenant shall
restore any damage occasioned by such removal.
(b) Intentionally Omitted.
(c) Payment of Taxes. Tenant shall pay before delinquency all
taxes levied against Tenant's personal property or trade fixtures in the
Premises and any Alterations installed by or on behalf of Tenant. If any such
taxes are levied against Landlord or its property, or if the assessed value of
the Premises is increased by the inclusion of a value placed on Tenant's
property, Landlord may pay such taxes, and Tenant shall upon demand repay to
Landlord Tenant's Percentage of the portion of such taxes resulting from such
increase.
*The Premises will be heated and cooled by separate units presently installed
that serve only the Premises. Electricity serving such heating and air
conditioning units shall be separately metered in accordance with Paragraph
6.1(b), below.
ARTICLE V LANDLORD'S COVENANTS
6.1 Services Provided by Landlord.
(a) Services. Landlord shall provide services, utilities,
facilities and supplies equal in quality to those customarily provided by
landlords in buildings of a similar design in the area in which the Property is
located. Landlord shall provide reasonable additional Building operation
services upon reasonable advance request of Tenant at reasonable rates from time
to time established by Landlord.
(b) Separately Metered Utilities. The Premises will be
separately metered or submetered as of the Commencement Date, and the costs of
utilities for the Premises
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shall not be included as an Operating Expense. Tenant shall pay the cost of all
separately metered utilities directly to the utility company.
(c) Graphics and Signs. Landlord shall provide, at Landlord's
expense, identification of Tenant's name and suite numerals at the main entrance
door to the Premises and the exterior directory, if any serving the building of
which the Premises are a part. All signs, notices, graphics and decorations of
every kind or character which are - visible in or from the Common Areas or the
exterior of the Premises shall be subject to Landlord's prior written approval,
which Landlord shall have the right to withhold in its absolute and sole
discretion.
(d) Right to Cease Providing Services. In case of Force
Majeure or in connection with any repairs, alterations or additions to the
Property or the Premises, or any other acts required of or permitted to Landlord
herein, Landlord may reduce or suspend service of the Building's utilities,
facilities or supplies, provided that Landlord shall use reasonable diligence to
restore such services, facilities or supplies as soon as possible. No such
reduction or suspension shall constitute an actual or constructive eviction or
disturbance of Tenant's use or possession of the Premises. See Additional
Provisions, AP9.
6.2 Repairs and Maintenance. Landlord shall repair and maintain (i) the
Common Areas, (ii) the structural portions of the Building, (iii) the exterior
walls of the Building (including exterior windows and glazing), (iv) the roof,
and (v) the basic plumbing, electrical, mechanical and heating, ventilating and
air-conditioning systems serving the Premises, in the manner and to the extent
customarily provided by landlords in similar buildings in the area. Tenant shall
pay for such repairs as set forth in Paragraph 3.2. If any maintenance, repair
or replacement is required because of any act, omission or neglect of duty by
Tenant or its agents, employees, invitees or contractors, the cost thereof up to
the full amount of the deductible of Landlord's insurance coverage shall be paid
by Tenant to Landlord as additional rent within thirty (30) days after billing.
6.3 Quiet Enjoyment. Upon Tenant's paying the rent and performing its
other obligations, Landlord shall permit Tenant to peacefully and quietly hold
and enjoy the Premises, subject to the provisions of this Lease.
6.4 Insurance. Landlord shall insure the Property, including the
Building and Tenant Improvements and approved Alterations, if any, against
damage by fire and standard extended coverage perils, and shall carry public
liability insurance, all in such reasonable amounts as would be carried by a
prudent owner of a similar building in the area. Landlord may carry any other
forms of insurance as it or its mortgagee may deem advisable. Insurance obtained
by Landlord shall not be in lieu of any insurance required to be maintained by
Tenant. Landlord shall not carry any insurance on Tenant's Property, and shall
not be obligated to repair or replace any of Tenant's Property.
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ARTICLE VII TENANT'S COVENANTS
7.1 Repairs, Maintenance and Surrender.
(a) Repairs and Maintenance. Tenant shall keep the Premises in
good order and condition, and shall promptly repair any damage to the Premises
excluding glass in exterior walls. Tenant shall also pay to repair any damage to
the rest of the Property, including glass in exterior walls, up to the full
amount of the deductible of Landlord's insurance coverage, if such damage is
attributable to Tenant's negligence or misuse caused by Tenant or its agents,
employees, or invitees, licensees or independent contractors. All repairs shall
be made in a workmanlike manner and any replacements or substitutions shall be
of a quality, utility, value and condition similar to or better than the
replaced or substituted item.
(b) Surrender. At the end of the Term, Tenant shall peaceably
surrender the Premises in good order, repair and condition, except for
reasonable wear and tear, and Tenant shall remove Tenant's Property, repairing
any damage caused by such removal and restoring the Premises and leaving them
clean and neat. Any property not so removed shall be deemed abandoned and may be
retained by Landlord or may be removed and disposed of by Landlord in such
manner as Landlord shall determine. Tenant shall be responsible for costs and
expenses incurred by Landlord in disposing any such abandoned property, and
making any incidental repairs and replacements to the Premises reasonable wear
and tear excepted.
7.2 Use.
(a) General Use. Tenant shall use the Premises only for the
Permitted Uses, and shall not use or permit the Premises to be used in violation
of any law or ordinance or of any certificate of occupancy issued for the
Building or the Premises, or of the Rules and Regulations. Tenant shall not
cause, maintain or permit any nuisance in, on or about the Property, or commit
or allow any waste in or upon the Property. *Tenant shall not use utility
services in excess of amounts reasonably determined by Landlord to be within the
normal range of demand for the Permitted Uses.
*Except for separately metered utilities which Tenant shall use safely,
(b) Obstructions and Exterior Displays. Tenant shall not
obstruct any of the Common Areas or any portion of the Property outside the
Premises, and shall not, except as otherwise previously approved by Landlord,
place or permit any signs, decorations, curtains, blinds, shades, awnings,
aerials or flagpoles, or the like, that may be visible from outside the
Premises. If prior to the Date of Lease, Landlord designates a standard window
covering for use throughout the Building, Tenant shall use this standard window
covering to cover all windows in the Premises.
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<PAGE> 15
(c) Floor Load. Tenant shall not place a load upon the floor
of the Premises exceeding the load per square foot such floor was designed to
carry, as determined by applicable building code.
(d) Compliance with Insurance Policies. Tenant shall not keep
or use any article in the Premises, or permit any activity therein, which is
prohibited by any insurance policy covering the Building, or would result in an
increase in the premiums thereunder.
(e) Rules and Regulations. Tenant shall observe and comply
with reasonable rules and regulations promulgated from time to time by Landlord
and delivered to Tenant ( the "Rules and Regulations"), and all modifications
thereto as made by Landlord and put into effect from time to time. Landlord
shall not be responsible to Tenant for the violation or non-performance by any
other tenant or occupant of the Building of the Rules and Regulations.
7.3 Assignment: Sublease. Except as hereinafter provided, Tenant shall
not assign its rights under this Lease nor sublet the whole or any part of the
Premises without Landlord's prior written consent. In the event that Landlord
grants such consent, Tenant shall remain primarily liable to Landlord for the
payment of all rent and for the full performance of the obligations under this
Lease and any excess rents collected by Tenant shall be paid to Landlord.** Any
assignment or subletting which does not conform with this Paragraph 7.3 shall be
void and a default hereunder.
7.4 Indemnity. Tenant, at its expense, shall defend (with counsel
satisfactory to Landlord), indemnify and hold harmless Landlord and its agents,
employees, invitees, licensees and contractors from and against any cost, claim,
action, liability or damage of any kind arising from (i) Tenant's use and
occupancy of the Premises or the Property or any activity done or permitted by
Tenant in, on, or about the Premises or the Property, (subject to the provisions
of Paragraph 11.7 of this Lease), (ii) any breach or default by Tenant of its
obligations under this Lease, or (iii) any negligent, tortious, or illegal act
or omission of Tenant, its agents, employees, invitees, licensees or
contractors. (Subject to the provisions of Paragraph 11.7 of this Lease)
Landlord shall not be liable to Tenant or any other person or entity for any
damages arising from any act or omission of any other tenant of the Building.
The obligations of Tenant in this Paragraph shall survive the expiration or
termination of this Lease.
**Tenant shall, however, be entitled to assign or sublet all or any portion of
the Premises to Cytrx Corporation, Vet Life, Inc., or any entity controlling,
controlled by, or under direct or indirect common control with Tenant, or any
subsidiary or affiliate thereof.
7.5 Tenant's Insurance. Tenant shall maintain with responsible
companies qualified to do business, in good standing in the state in which the
Premises are located and otherwise acceptable to Landlord and at its sole
expense the following insurance: (i) comprehensive general liability insurance
covering the Premises insuring Landlord as well
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as Tenant with limits which shall, at the commencement of the Term, be at least
equal to the Public Liability Insurance Amount and from time to time during the
Term shall be for such higher limits, if any, as are customarily carried in the
area in which the Premises are located with respect to similar properties, (ii)
workers' compensation insurance with statutory limits covering all of Tenant's
employees working in the Premises, and (iii) property insurance insuring
Tenant's Property for the full replacement value of such items. There shall be
no deductible for liability policies and a deductible not greater than $5,000
for property insurance policies. Tenant shall deposit promptly with Landlord
certificates for such insurance, and all renewals thereof, bearing the
endorsement that the policies will not be canceled until after thirty (30) days'
written notice to Landlord. All policies shall be taken out with insurers with a
rating of A-IX by Best's and otherwise acceptable to Landlord.
7.6 Payment of Taxes. If at any time during the Term, any political
subdivision of the state in which the Property is located, or any other
governmental authority, levies or assesses against Landlord a tax or excise on
rents or other tax (excluding income tax), however described, including but not
limited to assessments, charges or fees required to be paid, by way of
substitution for or as a supplement to real estate taxes, or any other tax on
rent or profits in substitution for or as a supplement to a tax levied against
the Property, Building or Landlord's personal property, then Tenant will pay to
Landlord as additional rent its proportionate share based on Tenant's Percentage
of said tax or excise.
7.7 Environmental Assurances.
(a) Covenants.
(i) Tenant shall not cause any medical waste
Hazardous Materials to be used, generated,
stored or disposed of on, under or about, or
transported to or from, the Premises unless
the same is specifically approved in advance
by Landlord in writing other than small
quantities of retail, household, and office
chemicals customarily sold over-the-counter
to the public and those items identified on
Exhibit G attached hereto which are related
to Tenant's Permitted Uses.
(ii) Tenant shall comply with all obligations
imposed by Environmental Laws, and all other
restrictions and regulations upon the use,
generation, storage or disposal of medical
waste or Hazardous Materials at, to or from
the Premises.
(iii) Tenant shall deliver promptly to Landlord
true and complete copies of all notices
received by Tenant from any governmental
authority with respect to the use,
generation,
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storage or disposal by Tenant of medical
waste or Hazardous Materials at, to or from
the Premises and shall immediately notify
Landlord both by telephone and in writing of
any unauthorized discharge of medical waste
or Hazardous Materials or of any condition
that poses an imminent hazard to the
Property, the public or the environment.
(iv) Tenant shall complete fully, truthfully and
promptly any questionnaires sent by Landlord
with respect to Tenant's use of the Premises
and its use, generation, storage and
disposal of medical waste or Hazardous
Materials at, to or from the Premises.
(v) Tenant shall permit entry onto the Premises
by Landlord or Landlord's representatives
upon receipt of not less than 24 hours prior
notice, or in case of emergency or imminent
danger, immediately to verify and monitor
Tenant's compliance with its covenants set
forth in this Paragraph and to perform other
environmental inspections of the Premises.
(vi) If Landlord conducts any environmental
inspections because it has reason to believe
that Tenant's activities have or are likely
to result in a violation of Environmental
Laws or a release of medical waste or
Hazardous Materials on the Property, then
Tenant shall pay to Landlord, as additional
rent, the costs incurred by Landlord for
such inspections, so long as it has been
reasonably determined that Tenant in fact
has violated such Environmental Laws or
released medical waste or Hazardous
Materials on the Property.
(vii) Tenant shall cease immediately upon notice
from Landlord any activity which violates or
creates a serious risk of violation of any
Environmental laws.
(viii) After notice to and reasonable approval -by
Landlord, Tenant shall promptly remove,
clean-up, dispose of or otherwise remediate,
in accordance with Environmental Laws and
good commercial practice, any medical waste
or Hazardous Materials on, under or about
the Property resulting from Tenant's
activities on the Property.
(b) Indemnification. Tenant shall indemnify, defend with counsel
acceptable to Landlord and hold Landlord harmless from and against any claims,
damages, costs,
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liabilities or losses (including, without limitation, any decrease in the value
of the Property, loss or restriction of any area of the Property, and adverse
impact of the marketability of the Property or Premises) arising out of Tenant's
use, generation, storage or disposal of medical waste or Hazardous Materials at,
to or from the Premises.
(c) Definitions. Hazardous Materials shall include but not be limited
to substances defined as "hazardous substances", "toxic substances", or
"hazardous wastes" in the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended; the federal Hazardous
Materials Transportation Act, as amended; and the federal Resource Conservation
and Recovery Act, as amended; those substances defined as "hazardous
substances", "materials", or "wastes" under the law of the state in which the
Premises are located; and as such substances are defined in any regulations
adopted and publications promulgated pursuant to said laws ("Environmental
Laws"); materials containing asbestos or urea formaldehyde; gasoline and other
petroleum products; flammable explosives; radon and other natural gases; and
radioactive materials.
(d) Survival. The obligations of Tenant in this Paragraph shall survive
the expiration or termination of this Lease.
7.8 Americans With Disabilities Act. Tenant shall comply with the
Americans with Disabilities Act of 1990 ("ADA") and the regulations promulgated
thereunder. Tenant hereby expressly assumes all responsibility for compliance
with the ADA relating to the Premises and the activities conducted by Tenant
within the Premises. Any Alterations to the Premises made by Tenant for the
purpose of complying with the ADA or which otherwise require compliance with the
ADA shall be done in accordance with this Lease; provided, that Landlord's
consent to such Alterations shall not constitute either Landlord's assumption,
in whole or in part, of Tenant's responsibility for compliance with the ADA, or
representation or confirmation by Landlord that such Alterations comply with the
provisions of the ADA.
ARTICLE VIII DEFAULT
8.1 Default. The occurrence of any one or more of the following events
shall constitute a default hereunder by Tenant:
(a) The failure by Tenant to make any payment of Base Rent or
additional rent or any other payment required hereunder, as and when due, where
such failure shall continue for a period of five (5) days after written notice
thereof from Landlord to Tenant; provided, that Landlord shall not be required
to provide such notice more than twice during the Term with respect to
non-payment of Rent, the third such non-payment constituting a default without
requirement of notice;
(b) Intentionally Omitted
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(c) The failure by Tenant to observe or perform any of the
express or implied covenants or provisions of this Lease to be observed or
performed by Tenant, other than as specified in clauses (a) above, where such
failure shall continue for a period of more than thirty (30) days after written
notice thereof from Landlord to Tenant; provided, however, that if the nature of
Tenant's default is such that more than thirty (30) days are reasonably required
for its cure, then Tenant shall not be deemed to be in default if Tenant
commences such cure within said thirty (30) day period, diligently prosecutes
such cure to completion, and completes such cure no later than ninety (90) days
from the date of such notice from Landlord;
(d) The failure by Tenant, Guarantor (if any), or any present
or future guarantor of all or any portion of Tenant's obligations under this
Lease to pay its debts as they become due, or Tenant or any such Guarantor (if
any) becoming insolvent, filing or having filed against it a petition under any
chapter of the United States Bankruptcy Code, 11 U.S.C. Paragraph 101 et seq.
(or any similar petition under any insolvency law of any jurisdiction) and such
petition is not dismissed within sixty (60) days thereafter, proposing any
dissolution, liquidation, composition, financial reorganization or
recapitalization with creditors, making an assignment or trust mortgage for the
benefit of creditors, or if a receiver, trustee, custodian or similar agent is
appointed or takes possession with respect to any property or business of Tenant
or Guarantor (if any); or
(e) If the leasehold estate under this Lease or any
substantial part of the property or assets of Tenant or of Guarantor of this
leasehold is taken by execution, or by other process of law, or is attached or
subjected to any involuntary encumbrance if such attachment or other seizure
remains undismissed or undischarged for a period of ten business (10) days after
the levy thereof.
8.2 Remedies of Landlord and Calculation of Damages.
(a) Remedies. In the event of any default by Tenant, whether
or not the Term shall have begun, in addition to any other remedies available to
Landlord at law or in equity, Landlord may, at its option and without further
notice exercise any or all of the following remedies:
(i) Terminate the Lease and upon notice to
Tenant of termination of the Lease all
rights of Tenant hereunder shall thereupon
come to an end as fully and completely as if
the date such notice is given were the date
originally fixed for the expiration of the
Term, and Tenant shall then quit and
surrender the Premises to Landlord and
Landlord shall have the right, without
judicial process, to re-enter the Premises.
No such expiration or termination of the
Lease shall relieve Tenant of its liability
and obligation under the Lease.
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<PAGE> 20
(ii) Enter the Premises and cure any default by
Tenant and in so doing, Landlord may make
any payment of money or perform any other
act. All sums so paid by Landlord, and all
incidental costs and expenses, including
reasonable attorneys' fees, shall be
considered additional rent under this Lease
and shall be payable to Landlord immediately
on demand, together with interest from the
date of demand to the date of payment at the
maximum lawful rate permitted to be charged
by Landlord.
(b) Calculation of Damages. If this Lease is terminated as provided in
Paragraph 8.2 or otherwise, Tenant, until the end of the Term, or what would
have been such Term in the absence of any such event, shall be liable to
Landlord, as damages for Tenant's default, for the amount of the Base Rent and
all additional rent and other charges which would be payable under this lease by
Tenant if this Lease were still in effect, less the net proceeds of any
reletting of the Premises actually collected by Landlord after deducting all
Landlord's expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage and management commissions,
operating expenses, legal expenses, reasonable attorneys' fees, alteration costs
and expenses of preparation of the Premises for such reletting. Tenant shall pay
such damages to Landlord monthly on the days on which the Base Rent would have
been payable as if this Lease were still in effect, and Landlord shall be
entitled to recover from Tenant such damages monthly as the same shall arise. In
lieu of the foregoing computation of damages, Landlord may elect, at its sole
option, to receive liquidated damages in one payment equal to the total amount
of Base Rent and additional rent reserved in this Lease from the date of default
to the date of expiration of the Term discounted at a fixed annual interest rate
equal to the Prime Rate plus 2%. The Prime Rate shall be the prime rate
published in the Wall Street Journal on the date of Landlord's election to
accelerate the rents hereunder. Whether or not the Lease is terminated, Landlord
shall in no way be responsible or liable for any failure to relet the Premises
or for any failure to collect any rent upon such reletting.
(c) No Limitations. Nothing contained in this Lease shall
limit or prejudice the right of Landlord to prove for and obtain in proceedings
for bankruptcy or insolvency by reason of the termination of this Lease, an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, the damages are to be
provided, whether or not the amount be greater, equal to, or less than the
amount of the loss or damages referred to above.
(d) Cumulative Remedies. Landlord's remedies under this Lease
are cumulative and not exclusive of any other remedies to which Landlord may be
entitled in case of Tenant's default or threatened default under this Lease,
including, without limitation, the remedies of injunction and specific
performance.
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ARTICLE IX CASUALTY AND EMINENT DOMAIN
9.1 Casualty.
(a) Casualty in General. If, during the Term, the Premises,
the Building or the Lot, are wholly or partially damaged or destroyed by fire or
other casualty, and the casualty renders the Premises totally or partially
inaccessible or unusable by Tenant in the ordinary conduct of Tenant's business,
then Landlord shall, within thirty (30) days of the date of the damage, give
Tenant a notice ("Damage Notice") stating whether, according to Landlord's good
faith estimate, the damage can be repaired within one hundred fifty (150) days
from the date of damage ("Repair Period"), without the payment of overtime or
other premiums. The parties' rights and obligations shall then be governed
according to whether the casualty is an Insured Casualty or an Uninsured
Casualty as set forth in the following Paragraphs.
(b) Insured Casualty. if the casualty results from a risk, the
loss to Landlord from which is fully covered by insurance maintained by Landlord
or for Landlord's benefit (except for any deductible amount), it shall be an
"Insured Casualty" and governed by this Paragraph 9.1 (b). In such event, if the
Damage Notice states that the repairs can be completed within the Repair Period
without the payment of overtime or other premiums, then Landlord shall promptly
proceed to make the repairs, this Lease shall remain in full force and effect,
and Base Rent shall be reduced, during the period between the casualty and
completion of the repairs, in proportion to the portion of the Premises that is
inaccessible or unusable during that period and which is, in fact, not utilized
by Tenant. Base Rent shall not be reduced by reason of any portion of the
Premises being unusable or inaccessible for a period of five (5) business days
or less. If the Damage Notice states that the repairs cannot, in Landlord's
estimate, be completed within the Repair Period without the payment of overtime
or other premiums, then either party may, terminate this Lease by written notice
given to the other within thirty (30) days after the giving of the Damage
Notice. If either party elects to terminate this Lease, the lease shall
terminate as of the date of the occurrence of such damage or destruction and
Tenant shall vacate the Premises five (5) business days from the date of the
written notice terminating the Lease. If neither party so terminates, then this
Lease shall remain in effect, Landlord shall make repairs, and Base Rent shall
be proportionately reduced as set forth above during the period when the
Premises is inaccessible or unusable and is not used by Tenant.
(c) Uninsured Casualty. If the casualty is not an Insured
Casualty as set forth in the previous Paragraph, it shall be an "Uninsured
Casualty" governed by this Paragraph 9.1 (c). In such event, if the Damage
Notice states that the repairs can be completed within the Repair Period without
the payment of overtime or other premiums, Landlord may elect, by written notice
given to Tenant within thirty (30) days after the Damage Notice, to make the
repairs, in which event this Lease shall remain in effect and Base Rent shall be
proportionately reduced as set forth above. If Landlord does not so
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elect to make the repairs, or if the Damage Notice states that the repairs
cannot be made within the Repair Period, this Lease shall terminate as of the
date of the casualty and Tenant shall vacate the Premises five (5) business days
from the date of Landlord's written notice to Tenant terminating the Lease.
(d) Casualty within final six months of Term. Notwithstanding
anything to the contrary contained in this Paragraph 9.1, if the Premises or the
Building is wholly or partially damaged or destroyed within the final nine (9)
months of the Term of this Lease, Landlord shall not be required to repair such
casualty and either Landlord or Tenant may elect to terminate this Lease.
(e) Tenant Improvements and Alterations. If Landlord elects to
repair after a casualty in accordance with this Paragraph 9.1, Landlord shall
cause Tenant Improvements and Alterations which Landlord has approved, to be
repaired and restored at Landlord's sole expense. Landlord shall have no
responsibility for any personal property placed or kept in or on the Premises or
the Building by Tenant or Tenant's agents, employees, invitees or contractors
and Landlord shall not be required to repair any damage to, or make any repairs
to or replacements of, Tenant's personal property.
(f) Exclusive Remedy. This Paragraph 9.1 shall be Tenant's
sole and exclusive remedy in the event of damage or destruction to the Premises
or the Building. No damages, compensation or claim shall be payable by Landlord
for any inconvenience, any interruption or cessation of Tenant's business, or
any annoyance, arising from any damage to or destruction of all or any portion
of the Premises or the Building.
(g) Waiver of Subrogation. Landlord and Tenant shall use
reasonable efforts to cause each insurance policy obtained by each of them to
provide that the insurer waives all right of recovery by way of subrogation
against either Landlord or Tenant in connection with any loss or damage covered
by such policy.
9.2 Eminent Domain.
(a) Eminent Domain in General. If the whole of the Premises,
or so much of the Premises as to render the balance unusable by Tenant, shall be
taken or appropriated under the power of eminent domain or condemnation (a
"Taking"), either Landlord or Tenant may terminate this Lease and the
termination date shall be the date of the Order of Taking, or the date
possession is taken by the Taking authority, whichever is earlier. If any part
of the Property is the subject of a Taking and such Taking materially affects
the normal operation of the Building or Common Areas, Landlord may elect to
terminate this Lease. A sale by Landlord under threat of a Taking shall
constitute a Taking for the purpose of this Paragraph 9.2. No award for any
partial or entire Taking shall be apportioned. Landlord shall receive (subject
to the rights of Landlord's mortgagees) and Tenant hereby assigns to Landlord
any award which may be made and any other proceeds in connection with such
Taking, together with all rights of Tenant to such award or proceeds, including,
without limitation, any award or compensation for the
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value of all or any part of the leasehold estate; provided that nothing
contained in this Paragraph 9.2(a) shall be deemed to give Landlord any interest
in or to require Tenant to assign to Landlord any separate award made to Tenant
for (i) the taking of Tenant's personal property, or (ii) interruption of or
damage to Tenant's business, or (iii) Tenant's moving and relocation costs.
(b) Reduction in Base Rent. in the event of a Taking which
does not result in a termination of the Lease, Base Rent shall be
proportionately reduced based on the portion of the Premises rendered unusable,
and Landlord shall restore the Premises or the Building to the extent of
available proceeds or awards from such Taking. Landlord shall be required to
repair or restore any damage to the Tenant Improvement and Alterations which
Landlord has approved which would become the Property of Landlord at the end of
the Term to the extent of available proceeds or awards from such taking.
(c) Sole Remedies. This Paragraph 9.2 sets forth Tenant's and
Landlord's sole remedies for Taking. Upon termination of this Lease pursuant to
this Paragraph 9.2, Tenant and Landlord hereby agree to release each other from
any and all obligations and liabilities with respect to this Lease except such
obligations and liabilities which arise or accrue prior to such termination.
ARTICLE X RIGHTS OF PARTIES HOLDING SENIOR INTERESTS
10.1 Subordination. This Lease shall be subject and subordinate to any
and all mortgages, deeds of trust and other instruments in the nature of a
mortgage, ground lease or other matters or record ("Senior Interests") which now
or at any time hereafter encumber the Property and Tenant shall, within twenty
(20) days of Landlord's request, execute and deliver to Landlord such recordable
written instruments as shall be necessary to show the subordination of this
Lease to such Senior interests. Notwithstanding the foregoing , if any holder of
a Senior Interest succeeds to the interest of Landlord under this Lease, then,
so long as Tenant is not in default of its obligations hereunder, this Lease
shall continue in full force and effect and Tenant shall attorn to such holder
and to recognize such holder as its landlord.
10.2 Mortgagee's Consent. No assignment of the Lease and no agreement
to make or accept any surrender, termination or cancellation of this Lease and
no agreement to modify so as to reduce the Rent, change the Term, or otherwise
materially change the rights of Landlord under this Lease, or to relieve Tenant
of any obligations or liability under this Lease, shall be valid unless
consented to by Landlord's mortgagees of record, if any.
ARTICLE XI GENERAL
11.1 Representations by Tenant. Tenant represents and warrants that any
financial statements provided by it to Landlord were true, correct and complete
when provided, and that no material adverse change has occurred since that date
that would
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render them inaccurate or misleading. Tenant represents and warrants that those
persons executing this Lease on Tenant's behalf are duly authorized to execute
and deliver this Lease on its behalf, and that this Lease is binding upon Tenant
in accordance with its terms, and simultaneously with the execution of this
Lease, Tenant shall deliver evidence of such authority to Landlord in form
satisfactory to Landlord.
11.2 Notices. Any notice required or permitted hereunder shall be in
writing. Notices shall be addressed to Landlord c/o Managing Agent at Managing
Agent's Address and to Tenant at Tenant's Address. Any communication so
addressed shall be deemed duly given when delivered by hand, one day after being
sent by Federal Express (or other guaranteed one day delivery service) or three
days after being sent by registered or certified mail, return receipt requested.
Either party may change its address by giving notice to the other.
11.3 No Waiver or Oral Modification. No provision of this Lease shall
be deemed waived by Landlord or Tenant except by a signed written waiver. No
consent to any act or waiver of any breach or default, express or implied, by
Landlord or Tenant, shall be construed as a consent to any other act or waiver
of any other breach or default.
11.4 Severability. If any provision of this Lease, or the application
thereof in any circumstances, shall to any extent be invalid or unenforceable,
the remainder of this Lease shall not be affected thereby, and each provision
hereof shall be valid and enforceable to the fullest extent permitted by law.
11.5 Requests by Tenant. Tenant shall pay, on demand, all costs
incurred by Landlord, including without limitation reasonable attorneys' fees,
in connection with any matter requiring Landlord's review or consent or any
other requests made by Tenant under this Lease, regardless of whether such
request is granted by Landlord.
11.6 Estoppel Certificate and Financial Statements.
(a) Estoppel Certificate. Within ten (10) days after written
request by Landlord, Tenant shall execute, acknowledge and deliver to Landlord a
written statement certifying (i) that this Lease is unmodified and in full force
and effect, or is in full force and effect as modified and stating the
modifications: (ii) the amount of Base Rent and the date to which Base Rent and
additional rent have been paid in advance; (iii) the amount of any security
deposited with Landlord; and (iv) that Landlord is not in default hereunder or,
if Landlord is claimed to be in default, stating the nature of any claimed
default, and (v) such other matters as may be reasonably requested by Landlord.
Any such statement may be relied upon by a purchaser, assignee or lender.
Tenant's failure to execute and deliver such statement within the time required
shall be a default under this Lease and shall also be conclusive upon Tenant
that this Lease is in full force and effect and has not been modified except as
represented by Landlord; and there are no uncured defaults in Landlord's
performance and Tenant has no right of offset, counterclaim or deduction against
rent.
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<PAGE> 25
(b) Financial Statements. Tenant shall, without charge
therefore, at any time, within ten (10) days following a request by Landlord,
deliver to Landlord, or to any other party designated by Landlord, a true and
accurate copy of Tenant's most recent unaudited financial statements. Except in
the case of a default by Tenant hereunder, Landlord agrees that it shall not
request such financial statements from Tenant more frequently than two times
during any one calendar year. All requests made by Tenant regarding renewals or
expansions must be accompanied by Tenant's most recent financial statements. All
requests made by Tenant regarding subleases, or assignments must be accompanied
by Tenant's prospective subtenant's and prospective assignee's most recent
financial statements.
11.7 Waiver of Liability. Landlord and Tenant each hereby waive all
rights of recovery against the other and against the officers, employees,
agents, and representatives of the other, on account of loss by or damage to the
waiving party or its property or the property of others under its control, to
the extent that such loss or damage is insured against under any insurance
policy that either may have in force at the time of the loss or damage. Each
party shall notify its insurers that the foregoing waiver is contained in this
Lease.
11.8 Execution, Prior Agreements and No Representations. This Lease
shall not be binding and enforceable until executed by authorized
representatives of Landlord and Tenant. This Lease contains all of the
agreements of the parties with respect to the subject matter hereof and
supersedes all prior dealings, whether written or oral, between them with
respect to such subject matter. Each party acknowledges that the other has made
no representations or warranties of any kind except as may be specifically set
forth in this Lease.
11.9 Brokers. Each party represents and warrants that it has not dealt
with any real estate broker or agent in connection with this Lease or its
negotiation except Broker. Each party shall indemnify the other and hold it
harmless from any cost, expense, or liability (including costs of suit and
reasonable attorneys' fees) for any compensation, commission or fees claimed by
any other real estate broker or agent in connection with this Lease or its
negotiation by reason of any act or statement of the indemnifying party.
11.10 Successors and Assigns. This Lease shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that only the original Landlord named herein shall
be liable for obligations accruing before the beginning of the Term, and
thereafter the original Landlord named herein and each successive owner of the
Premises shall be liable only for obligations accruing during the period of
their respective ownership.
11.11 Applicable Law and Lease Interpretation. This Lease shall be
construed, governed and enforced according to the laws of the state in which the
Property is located. In construing this Lease, Paragraph headings are for
convenience only and shall be disregarded. Any recitals herein or exhibits
attached hereto are hereby incorporated into
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this Lease by this reference. Time is of the essence of this Lease and every
provision contained herein. The parties acknowledge that this Lease was freely
negotiated by both parties, each of whom was represented by counsel;
accordingly, this Lease shall be construed according to the fair meaning of its
terms, and not against either party.
11.12 Costs of Collection, Enforcement and Disputes. Tenant shall pay
all costs of collection, including reasonable attorneys' fees, incurred by
Landlord in connection with any default by Tenant. If either Landlord or Tenant
institutes any action to enforce the provisions of this Lease or to seek a
declaration of rights hereunder, the prevailing party shall be entitled to
recover its reasonable attorneys' fees and court costs as part of any award.
Landlord and Tenant hereby waive trial by jury in any action, proceeding or
counterclaim brought by either of the parties hereto against the other, on or in
respect to any matter whatsoever arising out of or in any way connected with
this Lease, the relationship of Landlord and Tenant hereunder, Tenant's use or
occupancy of the Premises, and/or claim of injury or damage.
11.13 Holdover. If Tenant holds over in occupancy of the Premises after
the expiration of the Term, Tenant shall, at the election of Landlord become a
tenant at sufferance only on a month-to-month basis subject to the terms and
conditions herein specified, so far as applicable. Tenant shall pay rent during
the holdover period, at a base rental rate equal to one hundred fifty percent of
the Base Rent in effect at the end of the Term, plus the amount of Tenant's
Share of Expenses then in effect. Tenant shall also be liable for all damages
sustained by Landlord on account of such holding over.
11.14 Force Majeure. If Landlord or Tenant is prevented from or delayed
in performing any act required of it hereunder, and such prevention or delay is
caused by strikes, labor disputes, inability to obtain labor, materials, or
equipment, inclement weather, acts of God, governmental restrictions,
regulations, or controls, judicial orders, enemy or hostile government actions,
civil commotion, fire or other casualty, or other causes beyond such party's
reasonable control ("Force Majeure"), the performance of such act shall be
excused for a period equal to the period of prevention or delay. A party's
financial inability to perform its obligations shall in no event constitute
Force Majeure. Nothing in this Paragraph shall excuse or delay Tenant's
obligation to pay any rent or other charges due under this Lease.
11.15 Limitation On Liability. Landlord, and its partners, directors,
officers, shareholders, trustees or benefactors, shall not be liable to Tenant
for any damage to loss of personal property in, or to any personal injury
occurring in, the Premises, unless such damage, loss or injury is the result of
the gross negligence of Landlord or its agents as determined by a final
non-appeal judicial proceeding. The obligations of Landlord under this Lease do
not constitute personal obligations of the individual partners, directors,
officers, shareholders, trustees or beneficiaries of Landlord, and Tenant shall
not seek recourse against the partners, directors, officers, shareholders,
trustees or beneficiaries of Landlord, or any of their personal assets for
satisfaction of any liability with respect to this
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<PAGE> 27
Lease. in the event of any default by Landlord under this Lease, Tenant's sole
and exclusive remedy shall be against the Landlord's interest in the Property.
11.16 Lease not to be Recorded. Tenant agrees that it will not record
this Lease. Both parties shall, upon the request of either, execute and deliver
a notice or short form of this Lease in such form, if any, as may be permitted
by applicable statute. If this Lease is terminated before the Term expires the
parties shall execute, deliver and record an instrument acknowledging such fact
and the actual date of termination of this Lease, and Tenant hereby appoints
Landlord its attorney-in-fact, coupled with an interest, with full power of
substitution to execute such instrument.
11.17 Security Deposit. Upon the execution and delivery of this Lease,
Tenant shall pay to Landlord the Security Deposit, which shall be held as
security for Tenant's performance as herein provided and refunded to the Tenant
at the end of the Term subject to the Tenant's satisfactory compliance with the
conditions hereof. The Security Deposit may be commingled with other funds of
Landlord and no interest shall accrue thereon or be payable by Landlord with
respect to the Security Deposit. If all or any part of the Security Deposit is
applied to an obligation of Tenant hereunder, Tenant shall immediately upon
request by Landlord restore the Security Deposit to its original amount.
11.18 Guaranty of Lease. If Landlord and Tenant intend for this Lease
to be guaranteed by the Guarantor, upon the execution and delivery of this
Lease, and as a condition to the effectiveness of this Lease, Tenant shall cause
Guarantor, if any, to execute and deliver to Landlord a guaranty in the form
attached as Exhibit F. It shall constitute a default under this Lease if any
Guarantor fails or refuses, upon reasonable request by Landlord, to give: (i)
evidence of the due execution of the guaranty called for by this Lease, (ii)
current unaudited financial statements of Guarantor as may from time to time be
requested by Landlord; provided, however, that except in the case of a default
by Tenant hereunder, Guarantor shall not be required to submit such financial
statements more frequently than two times during any one calendar year, (iii) an
estoppel certificate, or (iv) written confirmation that the guaranty is still in
effect, substantially in the form of the estoppel certification described in
Paragraph 11.6(a) above.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease, which
includes the cover sheet, the foregoing Standard Provisions, Additional
Provisions, and Exhibits attached to this Lease, with the intent that each of
the parties shall be legally bound thereby and that this Lease shall become
effective as of the Date of Lease.
NEW ENGLAND MUTUAL LIFE VAXCEL, INC.
INSURANCE COMPANY
By:_________________________ By:__________________________
Name:_______________________ Name:________________________
Title:______________________ Title:_______________________
Date:_______________________ Date:________________________
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PART III ADDITIONAL PROVISIONS
The following provisions ("Additional Provisions") identified below and
attached and/or set forth below are included as part of the Lease between
Landlord and Tenant. Capitalized terms used in any of the Additional Provisions
and not otherwise defined shall have the meanings given such terms in Part I and
Part II of this Lease. Unless express reference is made to a provision in Part I
and Part II of this Lease for the purpose of modifying such provision, in the
event of any conflict between the Additional Provisions and the provisions of
Part I and Part II of this Lease, the provisions contained in Parts I and II
shall control.
AP1) Notwithstanding the foregoing, in no event shall the rentable
square footage of the Building or the Premises change during the first five
years of the Term unless Tenant exercises its option to expand the Premises. If
Landlord remeasures the Building or the Premises at any time prior to the time
Tenant exercises either of its options to renew this Lease, the rentable square
footage of the Building and/or the Premises shall change commencing on the
effective date of such renewal term to the extent there is an actual change in
the amount of space resulting from such remeasurement. Regardless of the
remeasurement results, for the purposes of any calculations based on the square
footage of the Building or the Premises, the rentable square footage of the
Building or of the Premises shall not be increased nor decreased by more than
five (5%) percent.
AP2) The Commencement Date of this Lease shall be the earlier of (i)
January 23, 1994 or (ii) the date Tenant occupies all of the Premises for the
conduct of its business. Notwithstanding the foregoing, prior to the
Commencement Date, Tenant may occupy for the conduct of its business, the office
portion of the Premises, which office portion which consists of approximately
1,806 rentable square feet, upon the issuance of all necessary valid occupancy
permits for the office portion of the Premises, and pursuant to the terms and
conditions of this Lease. The Base Rent for the office portion of the Premises
prior to the Commencement Date shall be $7.00 per rentable square foot,
commencing on the first date of such occupancy, payable monthly, in advance on
the first day of each month (and prorated for any partial months). Rent shall
commence for the entire Premises on January 2-3, 1994, regardless of whether
Tenant has completed the improvements to the Premises or taken occupancy.
AP3) , legal fees incurred for negotiating leases or collecting rents
from other tenants, costs of advertising space for lease in the Building, costs
directly and solely related to the maintenance and operation of the entity that
constitutes Landlord, such as accounting fees incurred solely for the purpose of
reporting Landlord's financial condition, or costs of renovating space in the
Building vacated by a tenant.
AP4) Lavista Associates, Inc. is acting as Agent for Landlord in this
transaction and is to be paid a commission by Landlord. Lavista Associates, Inc.
is not acting as Agent in this transaction for Tenant.
<PAGE> 29
Cushman & Wakefield of Georgia, Inc. is acting as Agent for Tenant in
this transaction and is to be paid a commission by Landlord. Cushman & Wakefield
of Georgia, Inc. is not acting as Agent in this transaction for Landlord.
AP5) Tenant shall have the right to terminate this Lease as of November
30, 1996, provided (i) Tenant is not then in default under this Lease, (ii)
Tenant provides written notice to Landlord of such termination no later than
August 1, 1996, (iii) Tenant pays at the time Tenant delivers such notice to
Landlord a termination fee in the amount of $18,817.14, and (iv) Tenant pays at
the time Tenant delivers such notice to Landlord an amount equal to the
unamortized cost of all tenant improvements and leasing commissions paid by
Landlord, which tenant improvements and leasing commissions shall be amortized
over a initial five (5) year term of this Lease with respect to the initial
Tenant Improvements and leasing commission (if Tenant exercises its option to
expand the Premises as provided below, the tenant improvements and leasing
commissions with respect to the Expansion Space shall be amortized over the
remaining portion of the then remaining term of the lease with respect to the
Expansion Space as such term may be extended in accordance with AP8 below. If
Tenant elects exercise its option to expand into the Expansion Space as provided
below, and Tenant elects its option to terminate the Lease as provided herein,
then the termination fee referred to in AP5(iii) above shall be increased by an
amount equal to $3.93 times the number of rentable square feet leased by Tenant
pursuant to its Expansion Option.
AP6) Landlord acknowledges receipt, subject to collection, of the
security deposit of $33,474.00, the first month's Base Rent of $2,789.50 and
first month's Additional Rent of $235.1 2 totaling $36,498.62.
AP7) Provided Tenant has not exercised its option to terminate this
Lease provided in AP5 above, Landlord hereby grants to Tenant (a) a first right
to lease that part of the Building designated as Suite 210 and marked "Expansion
Space" on Exhibit H attached hereto and consisting of approximately 2,400 square
feet (the "Expansion Space") if the Expansion Space is or becomes available for
occupancy before the fourth anniversary of the Commencement Date. If Tenant
desires to Lease the Expansion Space, and if the Expansion Space is then
available, Tenant may Lease the Expansion Space by giving Landlord notice at any
time on or before the date that is four (4) years from the Commencement Date and
Landlord and Tenant shall enter into an amendment to this Lease adding the
Expansion Space to the Premises. Expansion Space leased pursuant to this Section
AP7(a) shall be leased to Tenant upon the same terms and conditions in this
Lease, including, without limitation, the Term (as may be extended pursuant to
AP8 below) and the Base Rent due and payable hereunder. Base Rent and Additional
Rent shall commence upon the first to occur of the date on which Tenant occupies
such
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LANDLORD'S INITIALS TENANT'S INITIALS
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expansion space for purposes of conducting its business in the ordinary course
or ninety (90) days from the date on which Landlord and Tenant enter into a
supplemental agreement to this Lease incorporating such expansion space as part
of the Premises for the purpose of calculating Tenant's Percentage, Tenant's
Share of Operating Expenses and otherwise. Tenant shall submit its plans and
specification for such expansion space not later than fifteen (1 5) days
following the date of execution of such lease amendment. The approval of such
plans and specifications and the construction of Tenant Improvements in such
expansion space shall be governed in all respects by the terms and conditions of
the work letter attached to this Lease as Exhibit "D". In addition, Landlord
shall provide Tenant with an allowance in the amount of $1.40 per square foot of
expansion space taken by Tenant for each Lease Year (prorated for partial Lease
Years) remaining in the term (as the same may be extended pursuant to AP8 below)
up to a maximum of $16,800.00, which allowance shall be disbursed at the time
and in the manner set forth in such work letter; and
(b) A right of first refusal to lease the Expansion Space if during the
first four years after the Commencement Date, Landlord receives an offer
("Offer") to lease the Expansion Space which Landlord intends to accept,
Landlord shall first send Tenant notice of Landlord's desire to lease such
Expansion Space and Tenant shall have five (5) days subsequent to the date of
receipt by Tenant of notice from Landlord in which to exercise its option to
lease the Expansion Space Base Rent for the Expansion Space shall be the greater
of the Base Rent specified in AP7(a) above or the Base Rent specified in the
Offer. If Tenant does not, within such five (5) day period, elect to lease the
Expansion Space as set forth above, Landlord shall be free to lease such
Expansion Space to pursuant to the Offer. If the terms of the Offer change
materially, or if the transaction contemplated in the Offer is not completed,
then Landlord shall again notify Tenant in accordance with this Section AP7(b)
of such material change and any subsequent Offers.
Notwithstanding the foregoing, Tenant's right to lease the Expansion
Space is subject to the additional condition precedent that at the time Tenant
exercises its right to lease such Expansion Space Tenant shall not be in default
under this Lease beyond applicable grace or cure periods, if any.
AP8) So long as Tenant is not in default, Tenant may exercise the right
and option to extend and renew this Lease upon the same terms and conditions set
forth herein for two (2) additional successive periods of three (3) years each
following the expiration of the initial five (5) year Term by giving Landlord
written notice of the extension at lease six (6) months in advance of the
expiration of such initial Term or any extension of such Term, as the case may
be. During each Lease Year during any such extension term, Base Rent shall be
increased by four percent (4%) over the Base Rent due and payable during the
immediately preceding Lease Year.
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LANDLORD'S INITIALS TENANT'S INITIALS
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AP9) , provided however, that if the utility service to the Premises is
interrupted for reasons within the reasonable control of Landlord, and as a
result of such interruption the Premises are rendered untenantable and Tenant
does not use the Premises for three consecutive business days, then the Base
Rent shall abate until such service is restored.
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LANDLORD'S INITIALS TENANT'S INITIALS
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GLOSSARY
Term Paragraph In Which
Definition Appears
ADA 7.8
Additional Provisions Part III
Alterations 5.1
Base Rent Cover Sheet
Broker(s) Cover Sheet
Building Cover Sheet
Capital Costs 3.2
Commencement Date 2.1
Common Areas 1.2
Damage Notice 9.1
Date of Lease Cover Sheet
Force Majeure 11.14
Guarantor(s) Cover Sheet
Hazardous Materials 7.7
Landlord Cover Sheet
Landlord's Lien 5.2
Landlord's Share of Insurance Premiums Cover Sheet
Landlord's Share of Taxes Cover Sheet
Laws 5.1
Lease Year 3.2
Managing Agent Cover Sheet
Managing Agent's Address Cover Sheet
Notice 2.2
Operating Expenses 3.2
Permitted Uses Cover Sheet
Premises Cover Sheet
Property Cover Sheet
Public Liability Insurance Amount Cover Sheet
Repair Period 9.1
Security Deposit Cover Sheet
Senior Interests 10.1
Taxes 3.2
Tenant Cover Sheet
Tenant Improvements 4.1
Tenant's Address Cover Sheet
Tenant's Percentage Cover Sheet
Tenant's Share of Expenses 3.2
Term Cover Sheet
<PAGE> 33
EXHIBIT A
PREMISES
[DIAGRAM]
<PAGE> 34
EXHIBIT B
LOT
Northwoods Lot 3, Block B, Phase I - 3000 Northwoods Parkway
ALL THAT TRACT or parcel of land lying and being in Land Lots 256, 257, 270 and
271 of the 6th District of Gwinnett County, Georgia and being more particularly
described as follows:
TO FIND THE POINT OF BEGINNING. begin at a point formed by the southeasterly
margin of the right-of-way of Northwoods Circle (variable right-of-way). with
the southwesterly margin of the right-of-way of Northwoods Parkway (variable
right-of-way). if said margins were extended to form an angle instead of a
curve; thence running along the southwesterly margin of the right-of-way of
Northwoods Parkway. a distance of 642.72 feet to a point, which point is the
POINT OF BEGINNING; from the POINT OF BEGINNING, as thus established, continue
along said margin, along the arc of a curve to the left (said arc being
subtended a chard bearing South 38(degree)00'00" East, a distance of 120.19
feet). a distance of 120.21 feet to a point; thence continuing along said margin
South 40(degree)02'30" East, a distance of 227.84 feet to a point; thence
continuing along said margin along an arc of a curve to the right (said arc
being subtended a chord bearing South 30(degree)11'00" East, a distance of
119.81 feet), a distance of 120.40 feet to a point; thence leaving said margin
and running South 52(degree)36'30" West. a distance of 265.93 feet to a point;
thence running South 03(degree)24'30" West. a distance of 151.27 feet to a
point; thence running South 35(degree)13'00" West, a distance of 104.04 feet to
a point; thence running South 56(degree)35'30" West, a distance of 112.61 feet
to a point; thence running South 75(degree)01'30" West, a distance of 89.02 feet
to a point; thence running North 78(degree)411'30" West, a distance of 71.39
feet to a point; thence running North 44(degree)24'30" West. a distance of 68.59
feet to a print; thence running North 30(degree)57'45" West, a distance of 210
00 feet to a point; thence running South 82(degree)51'15" West, a distance of
62.67 feet to a point located on the easterly margin of the right-of-way of
Northwoods Circle (60-foot right-of-way): thence running along the easterly and
northeasterly margin of said right-of-way, along an arc of a curve-to the left
(said arc being subtended by a chord bearing North 22(degree)41'00" West. a
distance of 296.98 feet). a distance of 300.70 feet to a point; thence leaving
said margin and running North 59(degree)05'30" East, a distance of 267.83 feet
to a point; thence running North 59(degree)25'15" East, a distance of 409.93
feet to a point-located on the southwesterly margin of the right-of-way of
Northwoods Parkway, said point being the POINT OF BEGINNING, said property
containing 9.352 acres. as shown an that certain As-Built Survey for
Crow-Childress-Mobley 12 and New England Mutual Life Insurance Company, dated
April 7, 1986. prepared by Tri County Land Surveying, Boggus & Associates
Engineers, and bearing the seal of A.A. Katterhenry, GRLS No. 1692.
<PAGE> 35
EXHIBIT D
TENANT IMPROVEMENTS
Attach copy of Tenant Improvements.
<PAGE> 36
EXHIBIT D
TENANT IMPROVEMENTS
Tenant shall improve the Premises as follows:
1. Tenant, at its expense, shall construct, furnish or install all improvements,
equipment or fixtures within the Premises that are necessary for Tenant's
occupancy and use of the Premises (hereinafter referred to as "Tenant's Work").
Tenant's Work shall be in conformity with plans submitted to and approved by
Landlord and shall be performed in accordance with the following provisions:
(a) Tenant shall cause all plans, drawings and specifications for
Tenant's Work ("Plans and Specifications") to be prepared by licensed architects
and, where appropriate, mechanical, electrical and structural engineers.
Tenant's Plans and Specifications shall include such layouts, plans,
specifications and details as are required by Landlord, including, without
limitation, detailed information with respect to architectural design, color,
mechanical systems and electrical systems.
(b) Within 15 days following the date of execution of this Lease by
Landlord, Tenant shall prepare and submit to Landlord for its approval two sets
of Tenant's Plans and Specifications. Landlord shall renew same and shall
submit, within three business days of receipt thereof, its approval thereof or a
list of suggested modifications and/or additions. If the Plans and
Specifications are not approved by Landlord, Tenant shall, within 12 days of
receipt of Landlord's disapproval, prepare and resubmit to Landlord revised
Plans and Specifications for consideration by Landlord until such time as
Landlord gives Tenant written notice of its final approval thereof. In the event
that Tenant has failed timely to submit or resubmit preliminary drawings to
landlord, or in the event that Landlord shall disapprove the Plans and
Specifications resubmitted by Tenant, Landlord shall have the right to cancel
this Lease by notice to the Tenant, or to require Tenant to further revise and
resubmit the Plans and Specifications. Landlord's failure to timely respond to
the Plans and Specifications shall be deemed to indicate Landlord's approval
thereof.
(c) After approval of Tenant's final Plans and Specifications by
Landlord, and tender of possession of the Premises by Landlord to Tenant (which
tender shall occur upon execution of this Lease) Tenant shall proceed forthwith
to commence the performance of Tenant's Work and shall diligently pursue such
work to completion. Tenant's contractors and subcontractors shall be acceptable
to and approved by Landlord in writing and shall be subject to administrative
supervision by Landlord in their use of the Property and Premises and their
relationship with Landlord's contractors or contractors of other tenants on the
Property. Contractors and subcontractors engaged by Tenant shall employ persons
and means to insure so far as may be possible the progress of Tenant's Work
without interruption on account of strikes, work stoppage or similar causes of
<PAGE> 37
delay. Tenant's entry into the Premises prior to the Commencement Date for the
performance of Tenant's Work shall be subject to all of the terms and conditions
of this Lease except the payment of Rent. Any damage to the Building caused by
Tenant or its contractors or subcontractors in connection with the performance
of Tenant's Work shall be repaired at Tenant's expense.
(d) Any changes in Tenant's Work from the final plans and
specifications approved by landlord shall be subject to Landlord's approval, and
Tenant shall pay all reasonable costs incurred by Landlord in reviewing any
requested change.
(e) Upon completion of Tenant's Work Tenant shall furnish to Landlord
for its permanent files one reproducible set of "as built" drawings showing
Tenant's Work as constructed or installed in the Premises.
2. Construction of Tenant Work. Tenant shall, at Tenant's expense, procure all
permits and licenses and make all contracts necessary for the construction of
Tenant's Work. Tenant shall, at Tenant's expense, also obtain a construction
bond through its contractor naming Landlord and Tenant as dual obligees prior to
contractor beginning any work. Tenant's Work shall be done only by a contractor
approved in writing by Landlord prior to the commencement of Tenant's Work,
which approval shall not be unreasonably withheld. Landlord hereby approved
Choate Construction for construction of Tenant's Work. All Tenant's Work shall
conform to applicable statutes, ordinances, regulations, and codes and shall be
in accordance and compliance with the Plans and Specifications approved by
Landlord.
3. Completion of Tenant Work. Tenant shall complete Tenant's Work on or before
the Commencement Date of the Term.
4. Insurance and Indemnity. Tenant shall require its contractors and
subcontractors to furnish Landlord or Landlord's contractor with evidence of
insurance coverage (including but not limited to general liability and workers'
compensation insurance) as may be required by Landlord prior to the performance
of any work by Tenant's contractors or subcontractors. Tenant also agrees to
indemnify and hold Landlord harmless from and against any claims, actions,
losses, costs, fees (including attorneys' fees) or damages resulting from the
intentional or negligent acts or omissions of Tenant, its agents, employees,
contractors, or subcontractors in the performance of Tenant's Work.
5. Special Provisions Applicable to Tenant's Work. Tenant's Work shall be
performed in a first-class and workmanlike manner and all improvements
constructed pursuant thereto shall be in good and usable condition at the date
of completion. Tenant and Tenant's contractors are limited to performing their
work, including any storage for construction purposes, within the Premises only.
Tenant shall be responsible for daily removal from the Premises and the Property
of all trash, rubbish, and surplus materials resulting from any work being
performed in the Premises. Tenant shall exercise extreme care and diligence in
removing such trash, rubbish, or surplus materials from the Premises
- 37 -
<PAGE> 38
to avoid littering, marring, or damaging the Property, the Common Areas or any
of the other offices located on the Property. If any such trash, rubbish, or
surplus materials are not promptly removed from the Property in accordance with
the provisions hereof, or if any of the offices on the Property, or Common Areas
are littered, marred, or damaged, Landlord may cause same to be removed or
repaired, as the case may be, at Tenant's cost and expense. In the event
Landlord incurs any costs or expenses in performing the above, Tenant shall pay
the Landlord the amount of any such cost and expenses promptly upon demand
therefor. Tenant shall require its agents, employees, contractors, or
subcontractors to cause all materials or supplies to be delivered to the
Premises prior to 9:30 a.m. on the day of each such delivery.
6. Roof. Tenant shall not penetrate, puncture, or otherwise go upon or work upon
any portion of any roof, including, but not limited to that portion of the roof
over the Premises, without obtaining the prior written consent of Landlord. The
approval by Landlord of the Plans and Specifications does not constitute such
prior written consent unless otherwise expressly provided in the Plans. In the
event Landlord shall grant its consent to Tenant as provided above, Tenant
shall, at Tenant's sole cost and expense, be responsible for assuring that upon
completion of the installation of any items upon the roof or of other work
thereon that all necessary flashing, patching, and other repair that may, in the
sole discretion of Landlord, be necessary to return the roof to a waterproof
condition is performed in a first-class and workmanlike manner.
7. Lien Waivers, etc. Upon completion of Tenant's Work in accordance with the
Plans and Specifications, Tenant shall give Landlord written notice thereof and
shall simultaneously with such written notice furnish Landlord with the
following documents all in a form and substance acceptable to Landlord:
a. A detailed breakdown of the cost of Tenant's Work;
b. All necessary certificates of occupancy issued by the
appropriate governmental authorities.
c. Affidavits from all contractors, subcontractors, materialmen,
suppliers, architects, engineers, and all other persons
performing work or supplying materials and/or services on or
about the Premises in connection with Tenant's Work stating
that the cost of all such labor, material, supplies and
services incorporated in Tenant's Work has been paid in full,
and waivers of all liens and claims arising as a result of
such work; and
d. An estoppel certificate from Tenant.
8. Structural Work. Notwithstanding anything to the contrary contained in this
Lease, if any work required or proposed to be performed by Tenant shall be
structural or shall affect the structural integrity of any building on the
Property or any portion thereof, Landlord shall have the right, but not the
obligation, to do such work for Tenant and
- 38 -
<PAGE> 39
Tenant shall reimburse Landlord for all of Landlord's costs and expenses in
connection therewith plus an amount equal to ten percent (10%) thereof for
overhead plus an additional amount equal to ten percent (10%) of such total
costs and overhead for profit.
9. Allowance for Tenant's Work. Landlord shall contribute as reimbursement for
Tenant's Work an amount not to exceed $33,474.00 (the "Tenant Improvement
Allowance"). Tenant shall be solely responsible for all other costs and expenses
for Tenant's Work. The entire $33,474.00 must be used for improvements to the
Premises and for no personal or other use, except for payments to Tenant
pursuant to the provisions of this Exhibit "D". Landlord shall disburse the
Tenant Improvement Allowance in the amount of $33,474.00 upon Tenant's
compliance with all appropriate procedures identified in this Exhibit "D" and
completing or furnishing Landlord with evidence of all the following items:
a. See (d), below;
b. Obtaining and furnishing all of the required construction
permits;
c. See 1(c) and 7(a);
d. Affidavit from the architect that prepared the Plans and
Specifications certifying that all improvements to the
Premises have been completed substantially in accordance with
the Plans and Specifications;
e. Full and final Lien Waivers from all involved contractors and
subcontractors for the amount of all improvements;
f. A certificate of occupancy issued by the appropriate governing
authorities;
g. Performance Bond issued by a surety company reasonably
satisfactory to Landlord in an amount not less than the entire
amount of Tenant's Improvements, naming Landlord and Tenant as
dual obligees thereunder, and otherwise in form and substance
satisfactory to Landlord.
The Tenant Improvement Allowance shall be paid upon Tenant's occupancy of the
Premises and evidence of completion of the items above.
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<PAGE> 40
EXHIBIT G
List of Permitted Substances
1. Inorganic Chemicals (Approximately 1 to 2 pounds of each):
Sodium Chloride, Sodium Phosphates, Potassium Phosphates,
Magnesium Chloride.
2. Acids (Approximately 1 pint of each):
Hydrochloric Acid, Sulfuric Acid, Nitric Acid
3. Solvents (Approximately 1 gallon of each):
Hexane, Ethanol, Methanol
4. Miscellaneous (Approximately 1 gallon (liquids) or 1 pound (solids) of
each:
Detergents, Cosmetic oil (shark liver oil), Protein (dried
skim milk)
- 40 -
<PAGE> 41
EXHIBIT H
EXPANSION SPACE
[DIAGRAM]
- 41 -
<PAGE> 1
EXHIBIT 10.11
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT, made and entered into this
23rd day of January, 1996, by and between Regency Holdings, Inc. ("Landlord")
and Vaxcel, Inc. ("Tenant").
WITNESSETH
WHEREAS, Landlord and Tenant have heretofore entered into that certain
Lease Agreement dated November 21, 1993, by and between New England Mutual Life
Insurance Company (Landlord) and Vaxcel, Inc. (Tenant), regarding certain real
property in land Lots 256, 257, 270 and 271 of the 6th District of Gwinnett
County, Georgia (the "Lease") covering the lease of Property described as:
approximately 4,782 square feet of office/warehouse space located at 3000
Northwoods Parkway, Suite 200, Norcross, Georgia 30071.
WHEREAS, Landlord and Tenant desire to amend the Lease.
NOW, THEREFORE, for and in consideration of the sum of ONE AND
NO/100THS ($1.00) DOLLAR and other good and valuable consideration, the receipt
and sufficiency of which is acknowledged by Landlord and Tenant. Landlord and
Tenant hereby agree as follows:
1. Landlord and Tenant hereby agree that Landlord is now Regency Holdings,
Inc., a Georgia Corporation.
2. Landlord and Tenant hereby agree that Tenant shall expand into Suite
210 adjacent to Tenant's existing Premises comprised of approximately
1,500 square feet on January 23, 1996 bringing Tenant's total square
footage for Suites 200 and 210 to 6,282 square feet.
3. Landlord and Tenant hereby agree that Tenant shall pay Landlord base
monthly rental in accordance with this expansion for the entire 6,282
square foot Premises according to the following schedule:
January 23, 1996 - January 22, 1997 $3,962.90
January 23, 1997 - January 22, 1998 $4,119.95
January 23, 1998 - January 22, 1999 $4,287.47
4. Landlord and Tenant hereby agree that Landlord shall grant Tenant
$6,300.00 towards Tenant Improvements for said expansion space in
accordance with the terms and conditions of that Lease Agreement dated
November 23, 1993 between both parties.
<PAGE> 2
5. Landlord and Tenant hereby agree that Tenant shall expand into
approximately 900 square feet of warehouse space (known as Suite 215)
in accordance with the terms and conditions that Lease Agreement dated
November 23, 1993 between both parties should said warehouse space
become available on or before March 23, 1996.
Lavista Associates, Inc. is acting as agent for the Landlord in this
transaction and is to be paid a commission by the Landlord. Lavista Associates,
Inc. is not acting as agent in this transaction for the Tenant.
Cushman & Wakefield of Georgia, Inc. is acting as agent for the Tenant
in this transaction and is to be paid a commission by the Landlord. Cushman &
Wakefield of Georgia, Inc. is not acting as agent in this transaction for the
Landlord.
Except as expressly amended hereby, the Lease shall otherwise remain in
full force and effect as originally executed.
This Amendment shall bind and inure to the benefit of the parties
hereto, their respective heirs, executors, administrators, successors and
assigns.
IN WITNESS WHEREOF, the Landlord and Tenant have signed, sealed and
delivered this Agreement on the day, month, and year first above written.
LANDLORD: REGENCY HOLDINGS, INC.,
A Georgia Corporation
BY:_______________________ (SEAL)
Title: Vice President
TENANT: VAXCEL, INC.,
A Delaware Corporation
BY:______________________ (SEAL)
Title: VP Finance, Secretary
- 2 -
<PAGE> 1
EXHIBIT 10.12
AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE (this "Amendment"), made and entered
into as of the 15th day of October, 1996, by and between REGENCY HOLDINGS, INC.,
a Georgia corporation ("Landlord"), and Vaxcel, Inc., a Delaware corporation
("Tenant");
WITNESSETH THAT:
WHEREAS, New England Mutual Life Insurance Company ("Original
Landlord") and Tenant entered into that certain Lease dated November 23, 1993,
as amended by that certain First Amendment dated January 23, 1996 (collectively,
the "Lease") for certain premises in the building known as Suite 200 (the
"Building"), consisting of approximately 6282 rentable square feet of office
space located in Suite 200; and
WHEREAS, Landlord is successor-in-interest to Original Landlord;
WHEREAS, Landlord and Tenant desire to evidence the terms of such
renewal and to amend certain other terms and conditions of the Lease and
evidence their agreements and other matters by means of this Amendment;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged, the Lease is hereby amended and
the parties hereto do hereby agree as follows:
1. The Premises of the Lease is hereby expanded to include 971
s.f. of warehouse space shown on Exhibit A as Suite 210.
Rental commencement shall begin on the earlier of November 1
or occupancy.
2. Base Rent for the expansion shall be $5.00/sf, increasing at
3% per year.
3. a. As used in this Amendment, the term "Hazardous
Materials" shall mean and include any substance that
is or contains petroleum, asbestos, polychlorinated
biphenyls, lead, or any other substance, material or
waste which is now or is hereafter classified or
considered to be hazardous or toxic under any
federal, state or local law, rule, regulation or
ordinance relating to pollution or the protection or
regulation of human health, natural resources or the
environment (collectively "Environmental Laws") or
poses or
<PAGE> 2
threatens to pose a hazard to the health or safety of
persons on the Premises or any adjacent property.
b. Tenant agrees that during its use and occupancy of
the Premises it will not permit Hazardous Materials
to be present on or about the Premises except in a
manner and quantity necessary for the ordinary
performance of Tenant's business and that it will
comply with all Environmental Laws relating to the
use, storage or disposal of any such Hazardous
Materials.
c. If Tenant's use of Hazardous Materials on or about
the Premises results in a release, discharge or
disposal of Hazardous Materials on, in, at, under, or
emanating from, the Premises or the property in which
the Premises are located, Tenant agrees to
investigate, clean up, remove or remediate such
Hazardous Materials in full compliance with (a) the
requirements of (i) all Environmental Laws and (ii)
any governmental agency or authority responsible for
the enforcement of any Environmental Laws; and (b)
any additional requirements of Landlord that are
reasonably necessary to protect the value of the
Premises or the property in which the Premises are
located. Landlord shall also have the right, but not
the obligation, to take whatever action with respect
to any such Hazardous Materials that it deems
reasonably necessary to protect the value of the
Premises or the property in which the Premises are
located. All costs and expenses paid or incurred by
Landlord in the exercise of such right shall be
payable by Tenant upon demand.
d. Upon reasonable notice to Tenant, Landlord may
inspect the Premises for the purpose of determining
whether there exists on the Premises any Hazardous
Materials or other condition or activity that is in
violation of the requirements of the Lease or of any
Environmental Laws. The right granted to Landlord
herein to perform inspections shall not create a duty
on Landlord's part to inspect the Premises, or
liability on the part of Landlord for Tenant's use,
storage or disposal of Hazardous Materials, it being
understood that Tenant shall be solely responsible
for all liability in connection therewith.
e. Tenant shall surrender the Premises to Landlord upon
the expiration or earlier termination of the Lease or
this Amendment free of debris, waste or Hazardous
Materials placed on or about the Premises by Tenant
or its agents, employees, contractors or invitees,
and in a condition which complies with all
Environmental Laws.
- 2 -
<PAGE> 3
f. Tenant agrees to indemnify and hold harmless Landlord
from and against any and all claims, losses
(including, without limitation, loss in value of the
Premises or the property in which the Premises are
located), liabilities and expenses (including
reasonable attorney's fees) sustained by Landlord
attributable to (i) any Hazardous Materials placed on
or about the Premises by Tenant or its agents,
employees, contractors or invitees or (ii) Tenant's
breach of any provision of this Section 4.
g. The provisions of this Section 4 shall survive the
expiration or earlier termination of the Lease.
4. Tenant represents and warrants to Landlord that neither it nor
its officers or agents nor anyone acting on its behalf has
dealt with any real estate broker other than Bullock Terrell &
Mannelly Property Management, Inc. who represented Landlord in
the negotiating or making of this Amendment, and Wm. Leonard &
Co., who represented Tenant. Tenant agrees to indemnify and
hold Landlord, its agents, employees, partners, directors,
shareholders and independent contractors harmless from all
liabilities, costs, demands, judgments, settlements, claims,
and losses, including reasonable attorneys' fees and costs,
incurred by Landlord in conjunction with any such claim or
claims of any other broker or brokers, specifically including
Cushman & Wakefield, claiming to have interested Tenant in the
Building or Premises or claiming to have caused Tenant to
enter into this Amendment.
5. Anything in the Lease or this Amendment to the contrary
notwithstanding, covenants, undertakings and agreements herein
made on the part of Landlord are made and intended not for the
purpose of binding Landlord personally or the assets of
Landlord but are made and intended to bind only the Landlord's
interest in the Premises and the Building, as the same may,
from time to time, be encumbered and no personal liability
shall at any time be asserted or enforceable against Landlord
or its stockholders, officers or partners or their respective
heirs, legal representatives, successors and assigns on
account of the Lease or this Amendment on account of any
covenant, undertaking or agreement of Landlord in the Lease.
6. In the event of any transfer(s) of Landlord's interest in the
Premises or the Building, other than a transfer for security
purposes only, the transferor shall be automatically relieved
of any and all obligations and liabilities on the part of
Landlord after the date of such transfer, and Tenant agrees to
attorn to the transferee.
7. Tenant hereby affirms that as of the date hereof the Lease is
in full force and effect, that the Lease has not been modified
or amended (except as
- 3 -
<PAGE> 4
provided in this Amendment) and that all of Landlord's
obligations accrued to date have been performed. Tenant hereby
ratifies the provisions of the Lease on behalf of itself and
its successors and assigns and agrees to attorn and be bound
to Landlord and its successors and assigns as to all of the
terms, covenants and conditions of the Lease as amended
hereby. Tenant further agrees to fulfill all of its
obligations under the Lease as amended hereby to Landlord
throughout the remainder of the term.
8. Paragraph 11.2 of the Lease regarding the address of Landlord,
shall be amended to provide that the address of Landlord is,
and all notices to Landlord shall be sent to:
Notices to Landlord:
Regency Holdings, Inc.
c/o Bullock, Terrell & Mannelly Property Management, Inc.
400 Perimeter Center Terrace
Suite 145
Atlanta, GA 30350
Rent Checks to:
Regency Holdings, Inc.
c/o Bullock, Terrell & Mannelly Property Management, Inc.
400 Perimeter Center Terrace
Suite 145
Atlanta, GA 30350
9. Tenant hereby agrees that there are, as of the date hereof,
regardless of the giving of notice and the passage of time, or
both, no defaults or breaches on the part of Landlord or
Tenant under the Lease.
10. All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Lease.
ii. Lessor discloses to Lessee, and Lessee acknowledges, that
Lessor is the owner of record of the Building and of the
Leased Premises, and that Bullock, Terrell & Mannelly Property
Management, Inc. is authorized to manage the Building and the
Leased Premises, on behalf of the Lessor. The address of
Lessor is: c/o Bullock, Terrell & Mannelly Property
Management, Inc., 400 Perimeter Center Terrace, Suite 145,
Atlanta, GA 30346.
12. This space is leased "as is". Tenant may install access doors
from its space, at its expense. This Amendment represents the
entire agreement between
- 4 -
<PAGE> 5
the parties hereto. Landlord and Tenant agree that there are
no collateral or oral agreements or understandings between
them with respect to the Premises or the Building. This
Amendment supersedes all prior negotiations, agreements,
letters or other statements with respect to this extension of
the lease term.
EXCEPT AS expressly amended and modified hereby, the Lease shall
otherwise remain in full force and effect, the parties hereto hereby ratifying
and confirming the same. To the extent of any inconsistency between the Lease
and this Amendment, the terms of this Amendment shall control.
IN WITNESS WHEREOF, the undersigned parties have duly executed this
Amendment as of the day and year first above written.
LANDLORD:
REGENCY HOLDINGS, INC.,
a Georgia corporation by its agent
Bulloch, Terrell & Mannelly Property
Management, Inc.
By:______________________
Title:___________________
TENANT:
VAXCEL, INC.
a Delaware corporation
By:______________________
Title:___________________
- 5 -
<PAGE> 6
EXHIBIT 'A'
[Diagram]
- 6 -
<PAGE> 1
EXHIBIT 10.13
LICENSE AGREEMENT
OPTIVAX(R) COPOLYMER ADJUVANT
VAXCEL, INC. CORIXA CORPORATION
154 Technology Parkway 1124 Columbia Street, Suite 464
Norcross, GA 30092 Seattle, WA 98104
Ph: 770-453-0195 Ph: 206-667-5717
Fax: 770-453-0194 Fax: 206-667-5715
Contact: Paul Wilson Contact: Mark McDade
APRIL, 1996
<PAGE> 2
LICENSE AGREEMENT
(Optivax(R) Copolymer Adjuvant)
THIS OPTIVAX LICENSE AGREEMENT (the "Agreement") is made and executed
on 9 April 1996 ("Effective Date") by and between VAXCEL, INC., a Delaware
corporation, having a principal place of business at 154 Technology Parkway,
Technology Park/Atlanta, Norcross, Georgia 30092 ("Vaxcel") and CORIXA
CORPORATION, a Delaware corporation, having a principal place of business at
1124 Columbia Street, Suite 464, Seattle, Washington 98104 ("Corixa").
RECITALS
WHEREAS, Vaxcel has obtained from CytRx Corporation ("CytRx") an
exclusive, worldwide right and license under the Copolymer Patents to use, and
to sublicense others the right to use, the Copolymer as a Human Vaccine
Adjuvant.
WHEREAS, Vaxcel has provided Corixa with a letter from CytRx in
connection with the execution of the Agreement, attached hereto as Exhibit I.
WHEREAS, Corixa owns or controls certain vaccine and adjuvant
technology useful in the fields of cancer and infectious diseases.
WHEREAS, Corixa wishes to obtain a license to use the Technology in
the Field in order to develop the Product(s) to a certain stage and then
license the Product(s) in order that the Sublicensee(s) can further develop,
gain regulatory approval, market, manufacture, distribute, use and sell the
Product(s) in the Territory and Vaxcel is willing to provide such license to
Corixa, subject to the terms and conditions set forth herein.
WHEREAS, to induce Vaxcel to grant Corixa a license to the Technology,
Corixa will issue to Vaxcel concurrently with the execution of this Agreement
warrants to purchase up to 500,000 shares of Corixa Series A Preferred Stock in
accordance with that certain Warrant Agreement (the "Warrant") dated as of the
Effective Date in the form attached hereto as Exhibit II.
<PAGE> 3
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
corresponding meaning set forth below:
1.1 "Affiliate" shall mean, when used with reference to any Person, any
other Person controlling, controlled by, or under common control with
such Person. For purposes of the above definition, the term "control"
(including with correlative meaning, the terms "controlling",
"controlled by", and "under common control with") as used with respect
to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of such Person, whether through ownership of voting
securities, by contract, or otherwise.
1.2 "Copolymer" shall mean all technology covered by the Copolymer Patents
that is related to the polyoxyethylene/polyoxypropylene copolymer
designated by Vaxcel as CRL-1005, as more specifically described in
Exhibit III hereto.
1.3 "Copolymer Patents" shall mean the patents and patent applications on
the Copolymer set forth in Exhibit IV hereto, and all patents issuing
upon such applications, and all continuations, continuations-in-part,
additions, divisions, renewals, extensions, reexaminations and
reissues of any of the foregoing and all foreign counterparts of any
of the foregoing.
1.4 "Corixa Material" shall mean (a) any and all antigens owned or
controlled by Corixa on the Effective Date and/or during the term of
the Agreement in the disease areas in the Field; (b) LeIF Adjuvant;
(c) Microspheres; and (d) Non-Corixa Human Vaccine Adjuvants.
2
<PAGE> 4
1.5 "Corixa Material Information" shall mean any and all technical data,
scientific data and information relating to the Corixa Material in the
Field which is under the control of Corixa at any time during the term
of this Agreement, and which is necessary to the Development Program
for the Product(s).
1.6 "Corixa Material Patents" shall mean the patents and patent
applications on the Corixa Material set forth on Exhibit V hereto, and
all patents issuing upon such applications, and all continuations,
continuations-in-part, additions, divisions, renewals, extensions,
reexaminations and reissues of any of the foregoing and all foreign
counterparts of any of the foregoing.
1.7 "Development Program" shall mean any and all efforts and activities
necessary to commercialize the Product(s), including, but not limited
to, preclinical studies, formulations work, human clinical testing,
laboratory studies, regulatory activities, Product manufacturing, etc.
1.8 "Effective Date" shall mean the date specified in the introduction to
the Agreement.
1.9 "FDA" shall mean the United States Food and Drug Administration or any
successor agency thereto.
1.10 (i) "Field A" shall mean use of the Technology with the Corixa
Material in a human injectable and/or intranasally-delivered vaccine
for the following disease areas:
(a) Tuberculosis
(b) Leishmaniasis
(c) Malaria
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<PAGE> 5
(ii) "Field B" shall mean use of the Technology in the cancer field
with the following Corixa Material in a human injectable and/or
intranasally-delivered vaccine:
(a) Corixa Material covered by any claim of any of the
University of Washington Patents related to HER2/neu set forth
on Exhibit V, and analogs and homologs thereof;
(b) Corixa Material that is full or partial segments of ras
and are covered by any claim of any of the WRF Patents related
to ras set forth on Exhibit V, and analogs and homologs
thereof;
(c) Corixa Material that is full or partial segments of
bcr-abl or P53 and are covered by any claim of any of the WRF
Patents related to bcr-abl or P53 set forth on Exhibit V, and
analogs and homologs thereof;
(d) Corixa Material that is full or partial segments and are
covered by any claim of any of the WRF Patents, except as
related to ras, P53 or bcr-abl, set forth on Exhibit V and
analogs and homologs thereof;
(e) Corixa Material covered by any claim of any of the
University of Pittsburgh Patents related to Muc-1 set forth on
Exhibit V, and analogs and homologs thereof;
(f) Corixa Material related to breast cancer and covered by
any claim of any of the Corixa Patents set forth on Exhibit V,
and analogs and homologs thereof; and
(g) Corixa Material related to prostate cancer and covered by
any claim of any of the Corixa Patents set forth on Exhibit V,
and analogs and homologs thereof.
For purposes of this Agreement, each of the above tumor associated or
tumor specific antigens shall individually be a separate disease area.
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<PAGE> 6
(iii) "Field C" shall mean use of the Technology in human injectable
and/or intranasally-delivered vaccines with additional antigens useful
in the cancer field discovered or in-licensed by Corixa during the
term of this Agreement, provided such cancer antigens are wholly-owned
or licensed exclusively to Corixa.
For purposes of this Agreement, each additional tumor associated or
tumor specific antigen discovered or in-licensed by Corixa, if any,
shall individually be a separate disease area.
(iv) "Field" shall mean Field A, Field B, and Field C. Field shall
exclude any other uses of the Technology, and specifically shall
exclude: (a) use for injectable or intranasal delivery of antigens or
disease areas other than those described in the Field, and (b) use for
oral or other non-injectable / non-nasal routes of delivery of any
antigens or disease areas, including those described in the Field.
1.11 "Human Vaccine Adjuvant" shall mean a compound(s) that augments or
modulates an immune response when administered in conjunction with the
Corixa Material in a vaccine formulated for use in humans.
1.12 "Improvements" shall mean any and all new or useful processes,
formulations, manufacturing methods, compositions of matter or methods
of use which are first conceived, reduced to practice or developed
during the term of this Agreement.
1.13 "LeIF Adjuvant" shall mean the technology covered by the patents and
patent applications set forth on Exhibit V hereto as the Corixa LeIF
Adjuvant Patents, and all patents issuing upon such applications, and
all continuations, continuations-in- part, additions, divisions,
renewals, extensions, reexaminations and reissues of any of the
foregoing and all foreign counterparts of any of the foregoing.
1.14 "Microspheres" shall mean the technology covered by the patents and
patent applications set forth on Exhibit V hereto as the Corixa
Microspheres Patents, and all patents issuing upon such applications,
and all continuations, continuations-in- part, additions, divisions,
renewals, extensions, reexaminations and reissues of any of the
foregoing and all foreign counterparts of any of the foregoing.
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<PAGE> 7
1.15 "Net Sales" shall mean the gross amount recognized by Sublicensees and
its Affiliates for the sale or other disposition of the Product(s) to
an unaffiliated third party (as determined by generally accepted
accounting principles), less the following deductions for amounts
actually incurred related to the sale or other disposition:
(i) normal, customary trade discounts (including volume
discounts), credits and rebates and allowances and adjustments
for rejections, recalls, or returns;
(ii) reasonable freight and insurance costs and any sales,
use, excise, value-added, and similar taxes and duties imposed
on the sale of the Product(s) and included in the gross amount
charged and government-mandated vaccine insurance premiums;
(iii) amounts, at standard cost, for devices sold in
combination with the Product(s), and not billed separately
therefor, including, but not limited to, prefilled syringes
and ex vivo cell separation and selection devices.
1.16 "Non-Corixa Human Vaccine Adjuvant" shall mean a proprietary Human
Vaccine Adjuvant which Corixa licenses from a third party to further
augment or modulate the immune response of the Product(s). Non-Corixa
Human Vaccine Adjuvant specifically excludes LeIF Adjuvant,
Microspheres, and non-proprietary adjuvants such as salts of aluminum
(i.e., alum).
1.17 "Optivax" means any technology or know-how which utilizes, is based on
or arises out of use of the Copolymer. Optivax shall include any of
the foregoing technology or know-how that is incorporated in or used
in conjunction with the Product(s), other than the Corixa Material,
which affects or may affect the stability, pharmacokinetics,
pharmacodynamics, efficacy, potency, safety, absorption or other
activities of the Corixa Material.
1.18 "Optivax Information" shall mean any and all technical data,
scientific data and information relating to the Copolymer and Optivax
in the Field which is under the control of Vaxcel at any time during
the term of this Agreement, and which is necessary to the Development
Program for the Product(s).
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<PAGE> 8
1.19 "Optivax Supply Agreement" shall mean a Supply Agreement between
Vaxcel and a Sublicensee for the manufacture and supply of the
Copolymer, a draft copy of which is attached hereto as Exhibit VI.
1.20 "Person" shall mean an individual, a partnership, a corporation, a
trust, a joint venture, an unincorporated organization, or a
government or any department or agency thereof.
1.21 "Product(s)" shall mean the human vaccine(s) in which the Corixa
Material is incorporated, combined with, or otherwise uses the
Technology in the Field.
1.22 "PLA" shall mean a vaccine Product License Application filed with the
FDA or other international regulatory agencies.
1.23 "Product Information" shall mean any information developed by either
party on the Product(s) during the term of this Agreement. By way of
illustration, but not limitation, Product Information may include
patents, patent applications, formulations, preclinical data, clinical
data, laboratory data, manufacturing processes, processes, methods,
techniques, formulas, compositions, projects, plans, marketing data,
sales data and forecasts, development plans, customers, suppliers,
etc.
1.24 "Revenue" shall mean any combination of prepaid royalties,
profit-sharing or revenue-sharing income, license fees, and milestone
fees, in the form of cash or other cash equivalent consideration, such
as publicly traded securities or other highly liquid assets.
1.25 "Sublicensee" shall mean any Person(s) to which Corixa licenses the
Product(s).
1.26 "Technology" shall mean the Copolymer, Optivax, and the Optivax
Information.
1.27 "Territory" shall mean the world.
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<PAGE> 9
1.28 "Valid Copolymer Patent Claim" shall mean a claim included in the
Copolymer Patents that has not expired or been held invalid or
unenforceable by a court of competent jurisdiction in a final and
nonappealable or non-appealed judgment or a claim in an application
included in the Copolymer Patents that has been on file for less than
seven (7) years.
ARTICLE II
GRANT OF LICENSE
2.1 License Grant
Subject to all of the terms and conditions of this Agreement, Vaxcel
hereby grants to Corixa a license under Vaxcel's intellectual property
rights to:
(i) use the Technology in the Field for the purpose of
evaluating the Product(s) in preclinical animal studies and
Phase I human trials, and
(ii) sublicense the Technology only as part of a Product(s) to
Persons other than Affiliates in order that the Sublicensee(s)
can further develop, gain regulatory approval, market,
manufacture, distribute, sell, and use the Product(s) in the
Territory.
2.2 License Scope
Corixa's license shall be exclusive in the Field.
2.3 First Right to Negotiate for Certain Additional Disease Areas
(i) For twelve (12) months from the Effective Date, Vaxcel shall grant
Corixa a first right to negotiate an exclusive license agreement for
the Technology for use in combination with an antigen in the disease
areas of human Cytomegalovirus (CMV), Epstein-Barr Virus (EBV),
Chlamydia trachomatis, and Streptococcus A Bacteria (Group A Strep).
Corixa agrees to disclose to Vaxcel an intent not to
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<PAGE> 10
license for each of the above disease areas within thirty (30) days of
such an internal decision by Corixa, notwithstanding the twelve (12)
month duration of this option.
(ii) During the twelve (12) month period described in Section 2.3(i)
above, Vaxcel is free to perform preclinical evaluations with third
parties other than Corixa regarding use of the Technology in
combination with an antigen in the disease areas of human CMV, EBV,
Chlamydia trachomatis, and Group A Strep.
(iii) If during the twelve (12) month period described in Section
2.3(i) above a third party other than Corixa expresses a desire to
negotiate an option or license agreement for the Technology for use in
the disease areas of human CMV, EBV, Chlamydia trachomatis, or Group A
Strep, Vaxcel will notify Corixa and provide Corixa with the identity
of such disease area before entering into an agreement with such third
party. Corixa will then have thirty (30) days from such notification
to inform Vaxcel whether Corixa wishes to license the Technology for
such disease area. Depending upon Corixa's decision, the parties will
proceed as follows:
(a) If Corixa informs Vaxcel that it wishes to license the
Technology in such disease area, the parties will enter into
good faith negotiations and Corixa will then have sixty (60)
days from such notification to negotiate and execute a license
agreement with Vaxcel for such disease area. If the parties
for any reason do not or cannot successfully negotiate such a
license agreement for such disease area within the sixty (60)
day time period, Vaxcel is free to license the Technology for
such disease area to third parties without limitation.
(b) If Corixa discloses to Vaxcel an intent not to license the
Technology in such disease area, Vaxcel is free to license the
Technology for such disease area to third parties without
limitation.
Failure of the parties to successfully negotiate a license agreement
per (a) above or a Corixa decision not to license per (b) above will
not affect Corixa's first right to negotiate an exclusive license
agreement for the Technology in the remaining disease areas as set
forth in Section 2.3(i).
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<PAGE> 11
2.4 No Other Rights
(i) Nothing in this Agreement shall be construed to constitute a grant
to Corixa or the Sublicensees of any rights other than those expressly
granted herein. Specifically, Corixa and the Sublicensees shall not
have the right to use the Technology:
(a) with any antigens, materials, or substances other than the
Corixa Material; or
(b) to immunize animals or humans for the purpose of producing
antibodies which will subsequently be purified and
concentrated to make a high titer, antisera, human immune
globulin or monoclonal antibodies for commercial sale; or
(c) outside the Field or Territory.
(ii) Nothing in this Agreement shall be construed to grant Corixa
itself the right to use the Technology to develop the Product(s)
beyond Phase I human clinical testing, as this right for further
development of the Product(s) is granted to the Sublicensees only.
Corixa shall not use the Technology to develop the Product(s) beyond
Phase I human clinical trials without the prior written consent of
Vaxcel. Vaxcel agrees not to unreasonably withhold such approval, but
additional financial compensation to Vaxcel, consistent with the terms
of this Agreement, will be negotiated by the parties for this right.
(iii) Except under the limited circumstances provided in Section
5.7(ii) hereof and the Optivax Supply Agreement, nothing in this
Agreement shall be construed to constitute a grant to Corixa or the
Sublicensees the right to manufacture the Copolymer either directly or
through a third party.
(iv) Nothing in this Agreement shall be construed to constitute a
grant to Corixa or the Sublicensees the right to sublicense the
Technology alone (i.e., not part of the Product) to Persons other than
Affiliates.
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<PAGE> 12
(v) Nothing in this Agreement shall be construed to constitute a grant
to Vaxcel of any rights other than those expressly granted herein.
Specifically, Vaxcel shall not have any rights over or in respect of
or connected to the Corixa Material.
(vi) Nothing in this Agreement shall be construed to limit or restrict
Vaxcel's right to license the Technology to other third parties
outside the Field.
2.5 Sublicense Agreements
(i) The Technology shall be sublicensed by Corixa only pursuant to
license agreements (or option agreements as set forth in this Section
2.5) for the Product(s) in the name of Corixa, which are as protective
of Vaxcel and the Technology as such agreements are of Corixa and its
technology, and that, at a minimum, contain provisions protective of
intellectual property rights and disclaiming warranties and liability
(which disclaimers shall benefit Vaxcel) reasonably consistent with
those set forth in this Agreement.
(ii) Corixa agrees not to execute any license agreement for the
Product(s) with a Sublicensee(s) unless such Sublicensee(s) executes
an Optivax Supply Agreement with Vaxcel either prior to or
contemporaneously with the execution of such license agreement.
(iii) The Territory granted by Corixa to Sublicensees for the
Technology under any license agreements will not be greater than the
Territory granted by Corixa to the same Sublicensees for the Corixa
Material or the Product.
(iv) In the event a potential Sublicensee executes an option agreement
for the Product rather than a license agreement, such option agreement
between Corixa and the Sublicensee shall contain provisions protective
of intellectual property rights, disclaiming warranties and liability
(which disclaimers shall benefit Vaxcel), and precluding unauthorized
use of the Technology that are reasonably consistent with those set
forth in this Agreement. In the event any potential Sublicensee under
an option agreement: (a) distributes the Product(s) outside the
Territory; (b) uses the Technology outside the Field; (c) manufactures
or attempts to manufacture the Copolymer; (d) incorporates the
Technology in products that are not Products hereunder; or (e) fails
to comply with such potential Sublicensee's
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diligence obligations for the development and evaluation of the
Product, Corixa agrees to notify Vaxcel of such nonconforming activity
and, at the request of Vaxcel, immediately send a written notice to
such potential Sublicensee and terminate such option agreement
effective thirty (30) days following the receipt of such written
notice by the potential Sublicensee unless such potential Sublicensee
has cured such nonconforming activity within such thirty (30) day
period. In the event a potential Sublicensee breaches its option
agreement as described in any of (a)-(e) hereof three (3) times during
the term of the option agreement, Corixa shall, following the
foregoing notice to and subsequent request by Vaxcel, terminate such
option agreement immediately without any right of cure.
(v) Corixa shall use commercially reasonable efforts to cause all
consideration payable by Sublicensees to Corixa under a license or
option agreement hereunder to consist of Revenue. In the event Corixa
receives any consideration that is not Revenue from a Sublicensee
under an option or license agreement hereunder, Corixa shall
reasonably compensate Vaxcel as shall be mutually agreed by the
parties, consistent with the financial terms of this Agreement.
(vi) Corixa will be responsible for negotiating license and option
agreements with third parties regarding the Product(s) according to
the following guidelines:
(a) Corixa will advise Vaxcel of target Sublicensees in
advance of any negotiations;
(b) Corixa will keep Vaxcel routinely updated on progress of
discussions and negotiations with target Sublicensees;
(c) If reasonably requested by Corixa, Vaxcel's
representative(s) will attend, at Vaxcel's expense, meetings
with target Sublicensees;
(d) Corixa will send final executable copies of license and
option agreements for the Product(s) to Vaxcel for review and
comment prior to execution. Corixa will give reasonable
consideration to Vaxcel's comments, although if license
agreements comply with 2.5(i), (ii), (iii), and (v) and option
agreements comply with 2.5(iv) and (v) above, all final
decisions will be the sole responsibility of Corixa; and
(e) Corixa will send Vaxcel a copy of all final executed
license and option agreements for the Product(s) with
Sublicensees.
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(vii) If after four (4) years following the Effective Date, the
sublicenses granted by Corixa hereunder for a disease area do not
cover all countries in the Territory (the "Unlicensed Countries") and
Corixa determines in its sole discretion that the grant of sublicenses
for such disease area in the Unlicensed Countries would be
commercially reasonable, Corixa and Vaxcel shall, upon Vaxcel's
written request, negotiate in good faith the transfer from Corixa to
Vaxcel of the rights hereunder for such disease area in the then
Unlicensed Countries. If Vaxcel and Corixa cannot mutually agree on
the terms of such transfer within six (6) months, then Corixa shall
have an additional six (6) month period [total of five (5) years from
the Effective Date] to sublicense for such disease area in such
Unlicensed Countries. If such a sublicense does not exist at the end
of such period in all Unlicensed Countries, the rights hereunder for
such disease area shall, upon Vaxcel's written request, revert to
Vaxcel in the then Unlicensed Countries.
If at any time following the Effective Date, Corixa: (a) in its sole
discretion determines that the granting of sublicenses for a disease
area in an Unlicensed Country is not commercially reasonable; or (b)
in its sole discretion or by clear and convincing evidence, is, and
will continue to be until at least four (4) years following the
Effective Date, prohibited by law, regulation, contract, or otherwise
from granting any sublicense for a disease area in an Unlicensed
Country, then the rights granted hereunder for such disease area
shall, upon Vaxcel's written request, revert back to Vaxcel in such
Unlicensed Countries.
(viii) In the event a Sublicensee's Optivax Supply Agreement is
terminated in accordance with the terms therein, Corixa shall, at the
request of Vaxcel, terminate the rights to the Technology granted to
such Sublicensee under its license agreement.
ARTICLE III
INITIAL LICENSE FEE AND PREFERRED STOCK WARRANT
(i) In consideration of this grant of license to Corixa hereunder,
Corixa shall pay Vaxcel an upfront, non-refundable, non- creditable
license fee of fifty thousand United States dollars ($50,000), which
will accompany a duly executed copy of this Agreement.
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(ii) In addition, Corixa shall issue to Vaxcel, concurrently with the
execution of the Agreement, the Warrant to purchase up to 450,000
shares of Corixa Series A Preferred Stock, exercisable in accordance
with the following milestone schedule:
<TABLE>
<CAPTION>
# Shares % Total Description of Milestone
-------- ------- ------------------------
<S> <C> <C>
100,000 20% Execution of this Agreement
50,000 10% Successful completion by Vaxcel of a
Phase I trial demonstrating the safety
and adjuvant activity of the
Technology with any antigen
("Milestone #1").
100,000 20% Execution of the first agreement with
a Sublicensee for the Product
("Milestone #2").
75,000 15% Execution of the second agreement
with a Sublicensee for the Product
("Milestone #3").
50,000 10% Execution of the third agreement
with a Sublicensee for the Product
("Milestone #4").
40,000 8% Successful completion of 1st Phase II
trial of the Product by a Sublicensee
("Milestone #5").
25,000 5% Regulatory submission for approval
of the 1st Product by a Sublicensee
("Milestone #6").
30,000 6% FDA approval for commercialization
of the 1st Product by a Sublicensee
("Milestone #7").
20,000 4% FDA approval for commercialization
of the 2nd Product by a Sublicensee
("Milestone #8").
10,000 2% FDA approval for commercialization
------ -----
of the 3rd Product by a Sublicensee
("Milestone #9").
500,000 100% TOTAL
</TABLE>
For purposes of this Section 3(ii), "completion of a Phase I trial by
Vaxcel" will be defined as the date that Vaxcel delivers a final Phase
I report to Corixa.
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For purposes of this Section 3(ii), "completion of the first Phase II
of the Product by a Sublicensee" will be defined as the earlier of:
(i) the date the Sublicensee delivers a final Phase II report to
Corixa or (ii) twenty-four (24) months after the start of the Phase II
trial.
ARTICLE IV
REVENUE SHARING
4.1 Revenue Sharing Prior to Commercialization
Prior to commercialization of each Product, Corixa will share Revenue
with Vaxcel as follows:
(i) In the event a Sublicensee executes a definitive license
agreement for the Product(s), Vaxcel shall receive twenty
percent (20%) of Revenue paid to Corixa if Optivax is the sole
Non-Corixa Human Vaccine Adjuvant included in the Product(s).
(ii) In the event a Sublicensee executes a definitive license
agreement for the Product(s) where the Product(s) includes at
least one (1) Non-Corixa Human Vaccine Adjuvant in addition to
Optivax, Vaxcel shall receive twelve and one-half percent
(12.5%) of Revenue paid to Corixa.
(iii) In the event a potential Sublicensee executes an option
agreement for the use of Optivax with the Corixa Material in a
Product(s), Vaxcel shall receive twenty percent (20%) of
Revenue paid to Corixa during the term of such option
agreement if Optivax is the sole Non-Corixa Human Vaccine
Adjuvant available under such option agreement and twelve and
one-half percent (12.5%) of Revenue paid to Corixa during the
term of such option agreement if at least one (1) Non-Corixa
Human Vaccine Adjuvant in addition to Optivax is available
under such option agreement.
(iv) A Sublicensee may exercise an option for the Technology
only by executing a license agreement as set forth in Section
2.5. Upon the exercise of any such option agreement which
includes the use of Optivax with the Corixa Material in a
Product, the sharing of Revenue shall be determined pursuant
to Section 4.1(i) or 4.1(ii) hereof.
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(v) Upon termination of an option agreement, Corixa shall have
no further obligation to share Revenue with Vaxcel under this
Section 4.1 in connection with any Sublicensee or potential
Sublicensee, as applicable, as of such Sublicensee's, or
potential Sublicensee's, determination not to exercise its
rights or option to the Technology under such option
agreement, except for those Revenue sharing obligations based
on Revenue recognized by Corixa prior to such determination.
(vi) The inclusion of LeIF Adjuvant and/or Microspheres in the
Product(s) shall not affect Vaxcel's share of Revenue
hereunder.
4.2 Equity Funding, Government Grants, and R&D Funding
(i) Government grants to Corixa are specifically excluded from the
Revenue calculations for the purposes of calculating the Vaxcel
payment under Section 4.1.
(ii) The purchase of Corixa capital stock by Persons that are not
target Sublicensees are specifically excluded from the Revenue
calculations for the purposes of calculating the Vaxcel payment under
Section 4.1.
(iii) Any purchase of Corixa capital stock by a target or actual
Sublicensee which provides funding to Corixa in lieu of any other
Revenue will be considered "upside funding" and such upside funding
will be considered Revenue for the purposes of calculating the Vaxcel
payment under Section 4.1.
(iv) Research and development funding received by Corixa for the
Product(s) from non-government sources will be handled as follows:
(a) Both Corixa and Vaxcel will jointly define required R&D
support and funding required by each party pertaining to a
specific Product(s) and such costs will be directly reflected
in any R&D funding negotiated by Corixa and subsequently
earned and will not be considered Revenue for the purposes of
calculating the Vaxcel payment under Section 4.1.
(b) Any R&D funding which provides additional unspecified
funding above Vaxcel's and Corixa's costs for a specific
Product(s) as a result of accounting accommodations for the
third party will be considered "upside funding" and such
upside funding will be considered Revenue for the purposes of
calculating the Vaxcel payment under Section 4.1.
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4.3 Revenue Sharing After Commercialization
(i) Under all license agreements negotiated and executed by Corixa for
the Product(s), the minimum royalty rate on Net Sales of the
Product(s) that will be sought from each Sublicensee by Corixa for the
Product(s) will be 14.5% and the minimum royalty rate on Net Sales of
the Product(s) by a Sublicensee that will be paid by Corixa to Vaxcel
will be 2.5%.
(ii) Corixa and Vaxcel will split Revenue recognized at rates above
the 14.5% minimum rate noted above as follows:
(a) Vaxcel will receive 20% of all additional Revenue if
Optivax is the sole Non-Corixa Human Vaccine Adjuvant included
in the Product(s).
(b) Vaxcel will receive 12.5% of all additional Revenue if at
least one (1) Non-Corixa Human Vaccine Adjuvant in addition to
Optivax is included in the Product(s).
(iii) The inclusion of LeIF Adjuvant and/or Microspheres in the
Product(s) shall not affect Vaxcel's share of Revenue hereunder.
(iv) If Corixa executes a license agreement that contains a royalty
rate less than the 14.5% noted above, then the Vaxcel minimum royalty
rate of 2.5% of Net Sales of the Product(s) will not be reduced.
(v) The payments to Vaxcel under this Section 4.3 for each license
agreement for the Product(s) shall continue only for so long as the
sale of the Product(s) is subject to a Valid Copolymer Patent Claim.
4.4 Payment of Revenue and Royalties
(i) Payments owed to Vaxcel by Corixa under Sections 4.1 and 4.2 shall
be payable to Vaxcel within twenty (20) days after the date on which
such Revenue is received by Corixa.
(ii) Royalties payable to Vaxcel by Corixa under Section 4.3 shall be
due for each calendar quarter beginning with the first calendar
quarter in which Net Sales of the Product(s) occur and shall be
payable to Vaxcel within forty-five (45) days following the last day
of the applicable calendar quarter.
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4.5 Reports
(i) Corixa shall deliver to Vaxcel within forty-five (45) days after
the end of each calendar quarter a report, certified by the chief
financial officer (or equivalent) of Corixa, setting forth in
reasonable detail the calculation of the royalties payable to Vaxcel
for such calendar quarter, including the Net Sales of the Product(s)
on a country-by-country basis.
(ii) For the purposes of this Section 4.5, the Corixa report to Vaxcel
should be supported by and based upon a similar financial report from
each Sublicensee. Corixa will copy Vaxcel on such financial report(s)
from a Sublicensee(s), said copy to accompany the financial report
from Corixa to Vaxcel.
4.6 Currency and Place of Payment
(i) Corixa shall be responsible for all payments [excluding payments
from the Sublicensee(s) under the Optivax Supply Agreement] due to
Vaxcel as a result of this Agreement.
(ii) All payments from Corixa to Vaxcel under this Agreement shall be
made in immediately available funds in the legal currency of the
United States of America by corporate check to Vaxcel at the address
specified in Section 13.7 or an address designated in writing by
Vaxcel from time to time.
(iii) With respect to sales of the Product(s) made in a currency other
than United States dollars, royalties shall be computed based upon the
same conversion rate of the currencies of sales into United States
dollars as is published in The Wall Street Journal (Eastern Edition)
as of the last business day of the calendar quarter included in the
report.
(iv) In the event that Corixa is prevented from making any royalty
payment to Vaxcel under this Agreement by virtue of restrictions on
currency conversion or repatriation under the statutes, laws, codes or
governmental regulations of the country from which the payment is to
be made, then such royalty payments may be paid by depositing them in
the currency in which accrued to Vaxcel's account in
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<PAGE> 20
a bank acceptable to Vaxcel in the country whose currency is involved.
If the local currency can not be converted or remitted to Vaxcel
within twelve (12) months from the initial deposit, Corixa shall pay
Vaxcel the equivalent of such amount (including any interest earnings)
in United States dollars, and the local currency shall be transferred
to an account in a bank acceptable to Corixa in that country.
4.7 Late Payment
Payments to Vaxcel hereunder shall be deemed paid as of the day on
which they are received at the account designated pursuant to Section
4.6(ii). Any part of a payment or royalty which is not paid on or
before the date when due shall accrue interest thereon from such date
until the date of its payment in full at three (3) percentage points
over the per annum interest rate published as the "Prime Rate" in The
Wall Street Journal (Eastern Edition), but in no event shall such rate
exceed the maximum rate permitted by applicable law.
4.8 Records
Corixa agrees to maintain for three (3) years after the submission of
each report under Section 4.5 hereof full and accurate books and
records in sufficient detail to enable the royalties payable hereunder
to be verified.
4.9 Audit Rights
Vaxcel shall have the right for three (3) years after the submission
of each report under Section 4.5 hereof to appoint an independent
auditor to have access to the books and records of Corixa to conduct a
review or audit thereof for the purpose of verifying the payments due
to Vaxcel under this Agreement. Such review or audit shall be:
(i) conducted by an auditor from a "Big 6" accounting firm
which is nominated by Vaxcel and acceptable to Corixa, such
acceptance not to be unreasonably withheld;
(ii) upon reasonable prior notice to Corixa;
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<PAGE> 21
(iii) available not more than once each calendar year (during
normal business hours);
(iv) at Vaxcel's expense, except that Corixa shall bear any
such expense if the review or audit shows an underpayment to
Vaxcel of more than five percent (5%) for any calendar
quarter.
4.10 No Set-Offs or Counterclaims
Under no circumstances shall any amount payable to Vaxcel under this
Agreement be reduced or otherwise adjusted by virtue of any claim
against Corixa asserted or alleged by any of its Affiliates, any
assignees, Sublicensees, or any other third party.
ARTICLE V
RESPONSIBILITIES OF THE PARTIES
5.1 Transfer of Information
(i) Promptly following the Effective Date, Vaxcel shall use all
reasonable efforts to make available to Corixa a copy of Optivax
Information and will provide Corixa with additional Optivax
Information from time to time during the Agreement.
(ii) Promptly following the Effective Date, Corixa shall use all
reasonable efforts to make available to Vaxcel a copy of Corixa
Material Information and will provide Vaxcel with additional Corixa
Material Information from time to time during the Agreement.
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<PAGE> 22
5.2 Development Program Responsibility
(i) The Development Program shall be designed, directed, and monitored
by a committee composed of one (1) representative appointed by each
party (the "Research and Development Committee"). Initially, such
appointees shall be Drs. Syamal Raychaudhuri from Corixa and Mark
Newman from Vaxcel. The members of the Research and Development
Committee shall be the primary contacts between the parties with
respect to the Development Program, including all transmission of
documents, information, and materials thereto. Each party may replace
its appointee at any time after conferring with the other party, but
shall not do so without good reason if the other party objects. During
the Development Program, the Research and Development Committee shall
meet at least quarterly, at such times and locations as determined by
the Research and Development Committee. Either party may ask that
unresolved disagreements among members of the Research and Development
Committee be resolved by the respective chief executive officers of
Vaxcel and Corixa. If the chief executive officers do not resolve the
disagreement, either party may seek resolution in accordance with
Section 13.11.
At meetings of the Research and Development Committee, the parties
will share all Product Information generated under the Development
Program.
(ii) Except as otherwise set forth in this Article V, Corixa and the
Sublicensees shall be responsible at their cost and expense for any
and all activities relating to the Development Program for the
Product(s). Corixa and the Sublicensees shall proceed with all aspects
of the Development Program for the Product(s) as promptly as
practicable, consistent with reasonably accepted scientific practices.
(iii) The decision to include one or more Non-Corixa Human Vaccine
Adjuvant(s) in a Product(s) shall be made by the Research and
Development Committee based on the results of the Development Program.
5.3 Assistance by Vaxcel
(i) During the term of this Agreement, Vaxcel will formulate in a
manner determined by the Research and Development Committee up to
forty-five (45) reagents comprised of Optivax and Corixa Material at
no cost to Corixa.
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<PAGE> 23
(ii) If requested by the Research and Development Committee, Vaxcel
shall assist in the Development Program for the Product(s) by
providing reasonable support to Corixa for immunization of laboratory
animals. Vaxcel will be reimbursed by Corixa for this Development
Program support as follows:
<TABLE>
<CAPTION>
Element of Expense Cost to Corixa
------------------ --------------
<S> <C>
Purchase of Mice Direct cost
Feed, bed, & housing $0.15 per mouse per day in 1996
at Vaxcel vivarium dollars (this cost will be revised
annually on January 1 based on the
U.S. Producer Price Index)
Immunizations, bleeds, etc. No charge
</TABLE>
(iii) Notwithstanding the above, Corixa or the Research and
Development Committee may request the additional assistance of Vaxcel
in the Development Program related to the Product(s). Vaxcel agrees to
provide reasonable technical support to Corixa during the Development
Program for the Product(s) as requested by Corixa or the Research and
Development Committee. For any such work performed by Vaxcel, Corixa
will pay Vaxcel for any and all reasonable and agreed to expenses
associated with this effort.
(iv) During the Agreement, Vaxcel retains the right to preclinically
test the Product(s) in laboratory animals. If such testing is not
requested by Corixa or the Research and Development Committee, these
preclinical studies will be performed at Vaxcel's cost and expense.
Vaxcel agrees that the results of such testing will be used for
internal purposes only.
5.4 Commercialization of the Product
Corixa shall use commercially reasonable efforts to develop the
Product(s) and to identify and execute license agreements with
Sublicensees, which license agreements obligate the Sublicensees to:
(i) develop and launch the Product(s) as promptly as practicable,
consistent with commercially reasonable practice, and (ii) use
commercially reasonable efforts to maximize sales of the Product(s) in
the Territory.
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<PAGE> 24
5.5 Government Approvals for the Product
Except as provided in the Optivax Supply Agreement, Corixa and/or the
Sublicensees shall be responsible, at their cost and expense, for
obtaining and maintaining all approvals, licenses, permits,
registrations or authorizations, including pricing and reimbursement
approvals, of any U.S. or non-U.S. national, state or local regulatory
agency, department, bureau or other government entity, including the
FDA, necessary for the manufacture, use, storage, transport or sale of
the Product(s) sold by or on behalf of the Sublicensees or their
Affiliates. All such approvals, registrations and authorizations shall
be in the name of either Corixa or the Sublicensees.
5.6 Drug Master File on the Copolymer
(i) CytRx submitted a Drug Master File (the "DMF") on the Copolymer to
the FDA in August 1995. CytRx, at its cost and expense, shall be
responsible for maintaining the DMF on the Copolymer at FDA. CytRx
shall maintain ownership of this DMF at FDA.
(ii) Vaxcel shall cause CytRx to submit a DMF (or comparable document)
on the Copolymer to non-U.S. regulatory agencies where Corixa or the
Sublicensees intend to submit for human clinical testing or regulatory
approval for commercialization of the Product(s). Where permitted by
local regulatory law, CytRx shall maintain ownership of any DMFs at
non-U.S. regulatory agencies.
(iii) Corixa or the Sublicensees, as authorized sublicensees of
Vaxcel, may reference CytRx's DMFs on the Copolymer at FDA and
non-U.S. regulatory agencies for confidential regulatory purposes.
5.7 Manufacture and Supply of the Copolymer
(i) Vaxcel will cause the manufacture and supply of the Copolymer to
meet the Sublicensees' requirements in accordance with the terms and
conditions of the Optivax Supply Agreement, a draft copy of which is
attached as Exhibit VI to this Agreement.
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<PAGE> 25
(ii) In accordance with the terms of the Optivax Supply Agreement, if
Vaxcel and its licensed third party manufacturer are unwilling or
unable to supply the Copolymer for an unreasonable amount of time,
then the Sublicensee shall have the right to make or have made the
Copolymer. In such instance, Vaxcel agrees to make all necessary
Copolymer manufacturing know how available to the Sublicensee or its
designee.
(iii) All Optivax Supply Agreements will be negotiated and executed
directly between Vaxcel and the Sublicensees. Payments due to Vaxcel
under all Optivax Supply Agreements will be paid directly by the
Sublicensees to Vaxcel.
5.8 Manufacture and Supply of the Corixa Material and the Product
(i) Corixa does not plan to manufacture the Corixa Material or the
final Product. Corixa's strategy is to allow the Sublicensees to
manufacture or have manufactured the Corixa Material, any other
components of the final Product other than the Copolymer (if any), and
the final Product.
(ii) Any and all start-up or other costs related to the manufacture
and supply of the Corixa Material and the Product (other than the
Technology), whether borne by Corixa or the Sublicensees, shall not
effect Vaxcel's Revenue and/or royalty rates as described in Sections
4.1, 4.2 and 4.3.
5.9 Routine Updating by Parties after Commercialization of Product
After commercialization of the Product(s), Corixa shall provide Vaxcel
with semi-annual updates (which may be oral, unless Vaxcel requires a
written update), in reasonable detail, describing the Sublicensees'
commercial plans and activities for the Product(s).
5.10 Notification
Each party shall notify the other party of any adverse or unexpected
results, or any potential government action relevant to the Copolymer,
Optivax, the Corixa Material, or the Product of which such party is
aware, either directly or as a result of notice from a Sublicensee or
otherwise.
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<PAGE> 26
ARTICLE VI
OWNERSHIP OF TECHNOLOGY, CORIXA MATERIAL
AND IMPROVEMENTS
6.1 Ownership of Technology and Corixa Material
(i) The Technology and all Improvements thereon created by Vaxcel
shall at all times be the sole and exclusive property of Vaxcel; it
being understood that such rights of ownership shall not impair the
ability of Corixa to have access to the Technology and all
Improvements created by Vaxcel in accordance with the terms of this
Agreement.
(ii) The Corixa Material and all Improvements thereon created by
Corixa shall at all times be the sole and exclusive property of
Corixa; it being understood that such rights of ownership shall not
impair the ability of Vaxcel to have access to the Corixa Material and
all Improvements created by Corixa in accordance with the terms of
this Agreement.
6.2 Ownership of Improvements; Joint Improvements; Joint New Inventions
(i) All Improvements to the Technology created, acquired, or developed
solely by Corixa during the term of the Agreement (collectively,
"Corixa Sole Improvements") shall be the sole and exclusive property
of Corixa. All Improvements to the Corixa Material created, acquired,
or developed solely by Vaxcel during the term of the Agreement
(collectively, "Vaxcel Sole Improvements") shall be the sole and
exclusive property of Vaxcel.
(ii) All Improvements to the Technology or the Corixa Material
created, acquired, or developed jointly by Corixa and Vaxcel shall be
jointly owned by Corixa and Vaxcel and treated as joint inventions
under the U.S. laws applicable to joint inventions (collectively,
"Joint Improvements"). All inventions not related to either the
Technology or the Corixa Material created, acquired, or developed
jointly by Corixa and Vaxcel shall be jointly owned by Corixa and
Vaxcel and
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<PAGE> 27
treated as joint inventions under the U.S. laws applicable to joint
inventions (collectively, "Joint New Inventions").
(iii) Subject to Section 6.2(iv), Corixa or its Affiliates hereby
grants to Vaxcel a perpetual, irrevocable, transferable, exclusive
(even as to Corixa), worldwide, royalty-free, sublicenseable license
to the extent not otherwise owned by Vaxcel pursuant to the terms
hereof to develop, make, have made, use, market, sell and have sold
Corixa Sole Improvements and Joint Improvements (related to the
Technology) both in the Field and outside the Field.
(iv) Vaxcel agrees that the rights granted by Corixa under Section
6.2(iii) shall not impair the ability of Corixa to (a) have exclusive
rights to the Technology in accordance with the terms of the
Agreement, and (b) have exclusive rights to, and Vaxcel hereby grants
to Corixa exclusive rights to (identical with those rights granted
Corixa for the Technology), Corixa Sole Improvements, Joint
Improvements (related to the Technology) and all Improvements related
to the Technology created by Vaxcel in the Field subject to the terms
and conditions of the Agreement.
(v) Subject to Section 6.2(vi), Vaxcel or its Affiliates hereby grants
to Corixa a perpetual, irrevocable, transferable, exclusive (even as
to Vaxcel), worldwide, royalty-free, sublicenseable license to the
extent not otherwise owned by Corixa pursuant to the terms hereof to
develop, make, have made, use, market, sell and have sold Vaxcel Sole
Improvements and Joint Improvements (related to the Corixa Material)
both in the Field and outside the Field.
(vi) Corixa agrees that the rights granted by Vaxcel under Section
6.2(v) shall not impair the ability of Vaxcel to (a) have access to
the Corixa Material in accordance with the terms of the Agreement, and
(b) have access to, and Corixa hereby grants to Vaxcel rights to
(identical with those rights granted Vaxcel for the Corixa Material),
Vaxcel Sole Improvements, Joint Improvements (related to the Corixa
Material) and all Improvements related to the Corixa Material created
by Corixa in the Field subject to the terms and conditions of the
Agreement.
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<PAGE> 28
6.3 The parties will enter into good faith negotiations to determine an
appropriate course of action for all Joint New Inventions. Failing
agreement over such course of action, neither party shall be entitled
to make, use, sell or authorize others to make, use, or sell such
Joint New Inventions.
6.4 Each party shall promptly notify the other in writing of all
Improvements, Joint Improvements and Joint New Inventions.
6.5 Nothing in this Article VI shall be construed to constitute a grant
(or an obligation to grant) by Corixa of any rights related to the
Corixa Material, nor a grant (or an obligation to grant) by Vaxcel of
any of its rights related to the Technology, other than as set forth
in this Agreement.
6.6 In accordance with Section 5.2, Corixa may evaluate and/or develop a
Product(s) consisting of the Corixa Material, Optivax, and a
Non-Corixa Human Vaccine Adjuvant. If Corixa combines the Copolymer or
Optivax with a Non-Corixa Human Vaccine Adjuvant(s) and decides to
submit and pursue a patent on such combination, Corixa will restrict
such patents and patent applications to the disease areas in the
Field, unless otherwise agreed to by the parties.
ARTICLE VII
ENFORCEMENT, DEFENSE, AND PROSECUTION OF PATENTS
7.1 Infringement of Copolymer Patents
(i) In the event either party becomes aware of a suspected
infringement of any Copolymer Patent or the institution by a third
party of any proceedings for the revocation of any such patent in any
country, such party shall promptly notify the other party, and
following such notification, the parties shall confer. For suspected
infringement claims, Vaxcel shall have the right, but not the
obligation, to: (a) prosecute such suspected infringement by bringing
an infringement claim in a court of competent jurisdiction; or (b) in
its sole good faith discretion, settle such infringement dispute with
such third party outside of court. For revocation
27
<PAGE> 29
proceedings, Vaxcel shall have the right, but not the obligation, to:
(a) defend such revocation proceeding; or (b) in its sole good faith
discretion, settle such revocation proceeding with such third party.
All such actions prosecuted, settled, or defended pursuant to this
Section 7.1(i) shall be in Vaxcel's own name and entirely under its
own direction and control. In such event, Vaxcel shall be entitled to
all recoveries (if any) resulting from any such proceeding, action, or
settlement. At Vaxcel's expense, Corixa will reasonably assist Vaxcel
in such actions, settlements or proceedings if so requested by Vaxcel,
and will lend its name to such actions, settlements, or proceedings if
requested by Vaxcel or required by law. Notwithstanding the foregoing,
Corixa shall have the right to participate and be represented in any
such action or proceeding by its own counsel at its own expense.
(ii) If Vaxcel elects not to prosecute or settle any infringement
dispute or to defend or settle any proceeding for revocation described
in this Section 7.1(i) which involves rights to which Corixa is an
exclusive licensee, then Corixa may bring such action or defend such
proceeding at its own expense and entirely under its own direction and
control [subject to the limitations set forth in the last two
sentences of this Section 7.1(ii)]. In such event, Corixa shall share
all recoveries (if any, and only to the extent applicable to each
party's rights under this Agreement, each party recognizing that other
licensees may have an interest in such recoveries) in any such
proceeding or action with Vaxcel; with Corixa receiving 50% and Vaxcel
50% after all expenses have been deducted. At Corixa's own expense
(but subject to the foregoing deduction), Vaxcel will reasonably
assist Corixa in such actions or proceedings if requested by Corixa or
required by law. Notwithstanding the foregoing, Vaxcel shall have the
right to participate or be represented in any such action or
proceeding by its own counsel at its own expense. No settlement of any
action or defense that (a) restricts the scope or affects the
enforceability of any Copolymer Patent, (b) imposes any liability on
Vaxcel, or (c) does not provide Vaxcel with a full release from all
claims and liability may be entered into under this Section 7.1(ii) by
Corixa without Vaxcel's prior written consent. In addition, Vaxcel
reserves the right to assume control of the litigation at any time if
allowed by applicable law and Vaxcel determines in its sole discretion
that such control is necessary to protect its interests in the
Copolymer Patents, but the recovery sharing set forth above in Section
7.1(ii) shall not change.
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<PAGE> 30
7.2 Infringement of Corixa Material Patents
In the event either party becomes aware of a suspected infringement of
any Corixa Material Patent or the institution by a third party of any
proceedings for the revocation of any such patent in any country, such
party shall promptly notify the other party, and following such
notification, the parties shall confer. For suspected infringement
claims, Corixa shall have the right, but not the obligation, to: (a)
prosecute such suspected infringement by bringing an infringement
claim in a court of competent jurisdiction; or (b) in its sole good
faith discretion, settle such infringement dispute with such third
party outside of court. For revocation proceedings, Corixa shall have
the right, but not the obligation, to: (a) defend such revocation
proceeding; or (b) in its sole good faith discretion, settle such
revocation proceeding with such third party. All such actions
prosecuted, settled, or defended pursuant to this Section 7.2 shall be
in Corixa's own name and entirely under its own direction and control.
In such event, Corixa shall be entitled to all recoveries (if any)
resulting from any such proceeding, action, or settlement. At Corixa's
expense, Vaxcel will reasonably assist Corixa in such actions,
settlements or proceedings if so requested by Corixa, and will lend
its name to such actions, settlements, or proceedings if requested by
Corixa or required by law. Notwithstanding the foregoing, Vaxcel shall
have the right to participate and be represented in any such action or
proceeding by its own counsel at its own expense.
7.3 Responsibility for Defense
(i) In the event that a third party at any time threatens or brings
suit against either party, its Affiliates, or the Sublicensee(s)
alleging infringement of any third party patent on account of the
development, manufacture, marketing, use, or sale of any Product (each
a "Third Party Claim"), the party receiving notification of the Third
Party Claim shall promptly notify the other party, enclosing a copy of
all pleadings served, if any. Following such notification, the parties
shall confer to determine whether either or both parties shall control
the defense of the Third Party Claim. If both parties have been named
in the Third Party Claim, then, unless otherwise agreed between them,
each party shall have the right, but not obligation, to defend such
Third Party Claim in its own name and under its own direction and
control. If only one party has been named or if the parties agree that
only one party shall defend such Third Party Claim, then that party
shall have the right, but not obligation, to defend such Third Party
Claim in its own name and under its own
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<PAGE> 31
direction and control. The other party will reasonably assist the
party defending such Third Party Claim if so requested. In addition,
the other party shall have the right to participate and be represented
in any such Third Party Claim by its own counsel. No settlement of any
Third Party Claim that (a) restricts the scope or affects the
enforceability of any Copolymer Patent, (b) imposes any liability on
Vaxcel, or (c) does not provide Vaxcel with a full release from all
claims and liability may be entered into under this Section 7.3
without Vaxcel's prior written consent. No settlement of any Third
Party Claim that (a) restricts the scope or affects the enforceability
of any Corixa Material Patent, (b) imposes any liability on Corixa, or
(c) does not provide Corixa with a full release from all claims and
liability may be entered into under this Section 7.3 without Corixa's
prior written consent.
(ii) In the event that Vaxcel or Corixa, as the case may be, incurs
any costs or expenses in connection with the defense of any Third
Party Claim, such costs or expenses shall be borne by the party that
incurs them.
(iii) In the event, by way of counterclaim or otherwise, either party
or both parties recovers any damages or other sums in any action,
suit, or proceeding involving a Third Party Claim, or in settlement
thereof, such recovery shall be applied and shared as mutually agreed.
7.4 Prosecution of Patents
(i) Each party shall diligently file, prosecute and maintain all
patent rights relating to its respective Sole Inventions, and Corixa
shall diligently file, prosecute and maintain all patent rights
relating to the Joint Inventions, to effectively cover such inventions
throughout the Territory (collectively, the "Invention Patents" and
each party so filing, prosecuting and maintaining, a "Filing Party").
The Filing Party shall use reasonable commercial efforts to ensure
that the claims are filed and are issued on such Filing Party's
Invention Patents and that all such Filing Party's Invention Patents
are filed before any public disclosure (or other statutory law) to
ensure the validity of such Filing Party's Invention Patents. The
Filing
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<PAGE> 32
Party shall give the other party immediate notice of its decision to
prepare or file any Invention Patent. The Filing Party shall provide
the other party with draft copies of all such Filing Party's Invention
Patents and related prosecution documents, and the other party shall
have, to the extent reasonably possible, thirty (30) days from receipt
of such drafts, to provide comments to the Filing Party. The Filing
Party shall confer with the other party, and make reasonable efforts
to adopt the other party's suggestions regarding prosecution of any of
such Filing Party's Invention Patents. Notwithstanding the foregoing,
the Filing Party shall have the right to take such actions as are
reasonably necessary, in its good faith judgment, to preserve all
rights under such Filing Party's Invention Patents throughout the
Territory. As soon as practical subsequent to the filing of any Filing
Party's Invention Patent prosecution document, the Filing Party shall
provide the other party a copy of such document. In addition, the
Filing Party shall copy the other party with any official office
action and Filing Party submissions with respect to such Filing
Party's Invention Patents.
(ii) Should the party designated as the Filing Party in Section 7.4(i)
be unable or determine not to file, prosecute, maintain, or issue any
of such Filing Party's designated Invention Patents, or any related
applications, in any particular country or jurisdiction, the
designated Filing Party shall grant any and all authority necessary to
allow the other party to timely file, prosecute, and maintain such an
Invention Patent, all at the expense of the designated Filing Party.
ARTICLE VIII
TERM & TERMINATION
8.1 Term of the Agreement
This Agreement shall begin on the Effective Date and, unless sooner
terminated under this Article VIII, shall expire upon the expiration
of the last to expire Copolymer Patent.
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<PAGE> 33
8.2 Termination of Corixa's Rights in Certain Disease Areas
Corixa rights in a disease area will be terminated and revert back to
Vaxcel based on:
(i) Written notification by Corixa.
(ii) Corixa or a Sublicensee are not proceeding diligently in
accordance with Sections 5.2 and 5.4 with the Development
Program in a disease area, for any reason, including an
unfavorable preclinical or clinical result that prevents
further development, and such lack of development effort
continues for six (6) months.
(iii) If Corixa has not executed a license agreement for a
Product in a disease area within four (4) years of the
Effective Date of this Agreement.
(iv) If the Research and Development Committee reasonably
believes the inclusion of a Non-Corixa Human Vaccine
Adjuvant(s) in a Product(s) for a specific disease area could
cause regulatory problems for Vaxcel, Vaxcel will have the
option to terminate Corixa's rights to such disease area
without penalty. If members of the Research and Development
Committee disagree on this matter, either party may request
that this disagreement be resolved by the respective chief
executive officers of Vaxcel and Corixa. If the chief
executive officers do not resolve the disagreement, Vaxcel
will have the option to terminate Corixa's rights to such
disease area without penalty.
8.3 Termination of the Entire Agreement by Vaxcel or Corixa
(i) Upon the occurrence of any of the events of breach by Corixa set
forth below, Vaxcel shall have the right to terminate this Agreement
before expiration of its stated term:
(a) nonpayment of any amount payable to Vaxcel, effective ten
(10) days following written notice unless Corixa has cured
such breach during such ten (10) day period; or
(b) Corixa uses the Technology outside the Field, effective
thirty (30) days following written notice unless Corixa has
cured such breach during such thirty (30) day period; or
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<PAGE> 34
(c) Corixa manufactures or attempts to manufacture the
Copolymer either directly or through a third party, effective
thirty (30) days following written notice unless Corixa has
cured such breach during such thirty (30) day period.
(ii) Corixa shall have the right to terminate this Agreement in the
event Vaxcel breaches its obligation to cause Copolymer to be
manufactured and supplied in accordance with Section 5.7 hereof and
the terms of the Optivax Supply Agreement, effective thirty (30) days
following written notice unless Vaxcel has cured such breach during
such thirty (30) day period.
8.4 Termination of the Entire Agreement by Either Party
This Agreement may be terminated by either party before expiration of
its stated term, by giving written notice of termination, such
termination effective upon the giving of such notice, as follows:
(i) if at any time during this Agreement, the Copolymer or
Optivax is proven to be unapprovable by FDA and similar
non-U.S. regulatory agencies for safety or other reasons; or
(ii) if Corixa's rights in all disease areas have been
terminated; or
(iii) if Corixa has not executed a license agreement for any
Product in the Field within four (4) years of the Effective
date; or
(iv) breach by the other party of any covenant [other than a
payment covenant covered by Section 8.3(i)] or of any
representation or warranty contained in this Agreement that is
continuing thirty (30) calendar days after the non- breaching
party gives the breaching party written notice of such breach;
or
(v) the non-terminating party becomes insolvent, or voluntary
or involuntary proceedings by or against the non- terminating
party are instituted in bankruptcy or under any insolvency
law, or a receiver or
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custodian is appointed for the non-terminating party, or
proceedings are instituted by or against the non- terminating
party for corporate reorganization or the dissolution of the
non-terminating party, which proceedings, if involuntary,
shall not have been dismissed within sixty (60) days after the
date of filing, or the non- terminating party makes an
assignment for the benefit of creditors; or
(vi) The cessation of operations by the non-terminating party
(other than pursuant to a merger, reorganization or
consolidation in which the non-terminating party is not the
surviving corporation or a sale by the non-terminating party
of all or substantially all of its assets); or
(vii) the seizure or attachment of all or substantially all of
the assets of the non-terminating party, in conjunction with
any action against it by any third party, which seizure or
attachment is not released within forty-five (45) days after
such seizure or attachment and which is contested in good
faith by the non-terminating party.
8.5 No Other Events of Termination
This Agreement shall terminate or otherwise be deemed to end if and
only if the expiration or termination is effected pursuant to Sections
8.3 and 8.4 hereof.
8.6 Rights and Duties Upon Termination
(i) Termination of Corixa's rights in a disease area under Section 8.2
will not terminate the entire agreement between Corixa and Vaxcel.
(ii) If Corixa's rights in a disease area are terminated and revert
back to Vaxcel in accordance with Section 8.2, Vaxcel is free to
license the rights to such disease area to another third party without
limitation.
(iii) No exercise by either party of any right of termination will
constitute a waiver of any right of either party for recovery of any
moneys then due to it hereunder or any other right or remedy either
party may have by law or by this Agreement.
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(iv) Within thirty (30) days after termination of this Agreement under
Sections 8.3 and 8.4:
(a) Each party shall return to the other party all materials
of the other party received pursuant to this Agreement or
otherwise; and
(b) All unused Corixa Material, Copolymer and Optivax System
shall be returned to their rightful owner or destroyed, at the
sole option of the rightful owner. In addition, any
noncommercial inventories of Product(s), including clinical
supplies, shall be destroyed. All disposals of materials shall
be performed in compliance with applicable law.
(v) If the entire Agreement is terminated for any reason, Vaxcel is
free to license the Copolymer and Optivax in the Field to any third
party, without limitation.
(vi) If Vaxcel breaches any of the covenants and representations under
this Agreement and this Agreement is then terminated, all rights to
the point of termination shall remain with Corixa, including access to
CytRx's DMFs.
(vii) In the case of termination of this Agreement due to the
insolvency of Vaxcel, this Agreement may be transferable to CytRx upon
prior written approval of both Corixa and CytRx.
(viii) In the case of termination of this Agreement due to the
insolvency of Corixa, Vaxcel will honor all license agreements for the
Product(s) that were executed by Corixa prior to the point of
termination on mutually agreed, revised financial terms that are
negotiated between Vaxcel and Sublicensees.
(ix) In the event this Agreement is terminated pursuant to Sections
8.3(ii) or 8.4(iv) thereof on account of breach of the Agreement by
Vaxcel, Vaxcel shall be entitled to exercise the Warrant for the
number of shares of Series A Preferred Stock for which the Warrant is
exercisable in accordance with Article III based on the milestones
completed prior to such termination; provided, however, that in the
event of any such termination, Corixa shall have the right (the
"Repurchase Right"), at Corixa's sole discretion, to repurchase all or
any portion of the shares of Series A Preferred Stock purchased by
Vaxcel upon any exercise of the Warrant at a price per share equal to
the Warrant Price (as defined in the Warrant); provided further,
however, Corixa's Repurchase Right shall terminate when Vaxcel no
longer holds any shares of Series A Preferred Stock.
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(x) In the event this Agreement is terminated pursuant to Sections
8.3(i) or 8.4(iv) thereof on account of a breach of the Agreement by
Corixa, then upon such termination, Vaxcel shall be entitled to
exercise the Warrant immediately, in whole or in part in accordance
with the number of shares set forth in Article III for up to the full
500,000 shares of Series A Preferred Stock for which the Warrant is
exercisable, subject to adjustment pursuant to Section 2 of the
Warrant and subject to the limits set forth in Section 1.1 of the
Warrant.
(xi) In the event this Agreement is terminated for any reason other
than set forth in Sections 8.6(ix) and 8.6(x) above, Vaxcel shall be
entitled to exercise the Warrant for the number of shares of Series A
Preferred Stock for which the Warrant is exercisable in accordance
with Article III based on the milestones completed prior to such
termination; provided, however, that in the event of any such
termination, Corixa shall not have the Repurchase Right set forth in
Section 8.6(ix) hereof.
8.7 Survival of Contents
Notwithstanding anything else in this Agreement to the contrary, the
parties agree that Corixa's obligation to pay Vaxcel any Revenues or
royalties accrued but unpaid prior to such termination shall survive
the termination of this Agreement. In addition, Sections 4.8, 4.9,
6.1, 6.2, 6.3, 6.4, 7.1 through 7.3 (only to the extent such claim or
action arose prior to termination or expiration of this Agreement),
7.4, 9.1(i) through (iii), 9.1(v) and (vi), 9.5, 9.6, and 13.1 through
13.11 and this Section 8.7 and Articles III (only to the extent
necessary to Vaxcel's rights under the Warrant), X, XI, and XII shall
survive the termination of this Agreement, together with any other
provisions to the extent required for the full observation and
performance of the surviving terms by any or all of the parties
hereto.
ARTICLE IX
CERTAIN COVENANTS
9.1 Proprietary Information
(i) Non-Disclosure Covenant
Trade Secrets and Confidential Information and all physical
embodiments thereof received by one party (the "Receiving Party") from
the other (the "Disclosing
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Party") during the term of this Agreement are confidential to and are
and will remain the sole and exclusive property of the Disclosing
Party. At all times, both during the term of this Agreement and after
its termination, a Receiving Party shall hold all Trade Secrets of a
Disclosing Party in confidence, and will not use (except as needed to
exercise the rights granted hereunder), copy or disclose such Trade
Secrets, or any physical embodiment thereof, or cause any of such
Trade Secrets to lose their character as Trade Secrets. At all times
during the term of this Agreement and for a period of five (5) years
following its termination, a Receiving Party shall hold the
Confidential Information of a Disclosing Party in confidence, and will
not use (except as needed to exercise the rights granted hereunder),
copy or disclose such Confidential Information, or any physical
embodiments thereof, or cause any of such Confidential Information to
lose its character or cease to qualify as Confidential Information.
(ii) Security Measures
Trade Secrets and Confidential Information shall be maintained under
secure conditions by a Receiving Party, using reasonable security
measures and in any event not less than the same security measures
used by a Receiving Party for the protection of its own trade secrets
and confidential information of a similar kind. A Receiving Party
shall not remove, obscure, or deface any proprietary legend relating
to a Disclosing Party's rights, on or from any tangible embodiment of
any Trade Secrets or Confidential Information without the Disclosing
Party's prior written consent.
(iii) Disclosure Ordered by Government Bodies
If a Receiving Party is ordered by a court, administrative agency, or
other governmental body of competent jurisdiction to disclose Trade
Secrets or Confidential Information, or if it is served with or
otherwise becomes aware of a motion or similar request that such an
order be issued, then a Receiving Party will not be liable to a
Disclosing Party for disclosure of Trade Secrets or Confidential
Information required by such order if a Receiving Party complies with
the following requirements: (a) if an already-issued order calls for
immediate disclosure, then the Receiving Party shall immediately move
for or otherwise request a stay of such order to permit the Disclosing
Party to respond as set forth in this Section 9.1(iii); (b) the
Receiving Party shall immediately notify the
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Disclosing Party of the motion or order by the most expeditious
possible means; and (c) the Receiving Party shall join or agree to (or
at a minimum shall not oppose) a motion or similar request by the
Disclosing Party for an order protecting the secrecy of the Trade
Secrets and Confidential Information including joining or agreeing to
(or non-opposition to) a motion for leave to intervene by the
Disclosing Party.
(iv) Reports of Misappropriation by Others
The Receiving Party shall immediately report to the Disclosing Party
any action by any person of which the Receiving Party has knowledge:
(a) to use or disclose any portion of the Trade Secrets or
Confidential Information without authorization from the Disclosing
Party; or (b) to copy, reverse assemble, reverse compile or otherwise
reverse engineer any part of such materials (except as permitted
herein).
(v) Trade Secrets Defined
"Trade Secrets" means information related to the Disclosing Party
which: (a) derives economic value, actual or potential, from not being
generally known to or readily ascertainable by other persons who can
obtain economic value from its disclosure or use; and (b) is the
subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
(vi) Confidential Information Defined
"Confidential Information" means information that is: (a) confidential
to the business of the Disclosing Party; (b) is designated and
identified as such by the Disclosing Party; and (c) is not a Trade
Secret. Confidential Information does not include:
(i) any information that is at the time of receipt by the
Receiving Party or thereafter becomes part of the public
domain other than as a result of the unauthorized actions of
the Receiving Party (through publication or otherwise); or
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(ii) any information that was independently known to the
Receiving Party prior to receipt thereof from the Disclosing
Party, as evidenced by written records of the Receiving Party;
or
(iii) any information that was disclosed to the Receiving
Party by a third party having the right to disclose such
information; or
(iv) information that is required to be disclosed by the
Receiving Party by proper order of a court or administrative
body, but prior to such disclosure, the Receiving Party must
notify the Disclosing Party of its reasonable belief that
disclosure is required and provide the Disclosing Party
reasonable opportunity to contest such disclosure.
Notwithstanding the foregoing, it is understood that a Receiving Party
may disclose Trade Secrets and Confidential Information to its
consultants, outside contractors, clinical investigators,
Sublicensees, potential Sublicensees (including, but not limited to
optionees hereunder), and agents if such persons agree to keep such
information secret to the same extent the Receiving Party is so
obligated hereunder, and agree to use such information only for such
purposes as the Receiving Party is authorized to use such information
under this Agreement.
9.2 Certain Trademark Matters
(i) Vaxcel received official notice from the U.S. Patent and Trademark
Office in August 1995 that the Statement of Use for the Optivax
trademark has been accepted and that the Trademark Office will
register this mark in due course.
At its own cost and expense, Vaxcel will seek, register, maintain, and
defend such registration of the Optivax trademark.
(ii) Corixa and the Sublicensees shall be entitled to use and refer to
Vaxcel's trademarks in their reports to stockholders, registration
statements, private placement memoranda and similar corporate
documents and records, with Vaxcel's prior written approval of such
use and without obligation to Vaxcel.
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(iii) Vaxcel shall be entitled to use and refer to Corixa's and the
Sublicensees' trademarks in their reports to stockholders,
registration statements, private placement memoranda and similar
corporate documents and records, with Corixa's prior written approval
of such use and without obligation to Corixa or the Sublicensees.
(iv) At their own expense and cost, Corixa and the Sublicensees shall
own, shall have the sole right to use, and shall be responsible for
the selection, registration, prosecution, defense, and maintenance of
all trademarks [other than the Optivax mark described under Section
9.2(i) herein] which they employ in connection with the Corixa
Material and the Product(s). Corixa and the Sublicensees shall not use
any trademarks for the Corixa Material or the Product(s) which are
confusingly similar to the Optivax trademark.
9.3 Compliance with Laws
Corixa and the Sublicensees shall comply with all applicable laws,
rules and regulations pertaining to the use of the Technology and the
development, clinical testing, manufacturing, marketing, advertising,
sale, use and distribution of the Product(s).
9.4 Taxes
All taxes, assessments and fees of any nature levied or incurred on
account of any payments accruing under this Agreement, by national,
state or local governments, will be assumed and paid by Corixa or the
Sublicensees, except taxes levied thereon as income to Vaxcel, and if
such taxes are required to be withheld by Corixa or its sublicensees,
they will be deducted from such payments due to Vaxcel and will be
paid by Corixa or the Sublicensees for the account of Vaxcel, a
receipt thereof secured, if available and sent to Vaxcel. If for any
reason Vaxcel cannot credit such withholding tax in a particular
country against the Federal income taxes paid by Vaxcel, Corixa or the
Sublicensees shall increase the royalty in such country to provide
Vaxcel with a net amount equal to the royalty that would have been
paid absent such withholding tax.
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9.5 Press Releases
Each party shall provide the other party with the prior opportunity to
review and approve any press releases or similar public announcements
concerning this Agreement or the Product(s) as soon as practicable,
but in no event later than 24 hours before an announcement is made.
Both parties acknowledge that its opportunity to review and approve
press announcements is subject to and may be limited by any securities
laws to which the parties may be subject that require immediate
disclosure.
Both parties agree not to disclose the terms of this Agreement,
including any exhibits or attachments hereto, without the prior
written consent of the other party.
9.6 Publication and Presentation
(i) If either party desires to publish or present the results of the
Development Program, the publishing / presenting party shall provide
the non-publishing / non-presenting party a copy of the manuscript of
any proposed publication or presentation. The non-publishing /
non-presenting party shall then have thirty (30) days to review and
comment on the manuscript or presentation, and the publishing /
presenting party agrees to delete any information identified by the
non-publishing / non-presenting party as its Trade Secrets or
Confidential Information.
(ii) In the event the non-publishing / non-presenting party determines
that a patent application covering information contained in the
proposed publication or presentation should be filed, the party
proposing the publication or presentation shall delay such publication
or presentation to allow a reasonable amount of time for such filing
to be made.
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ARTICLE X
DISCLAIMER
EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE XII HEREINAFTER, NEITHER
CORIXA NOR VAXCEL MAKE ANY EXPRESS OR IMPLIED WARRANTIES, STATUTORY OR
OTHERWISE, CONCERNING THE TECHNOLOGY, THE CORIXA MATERIAL, THE PRODUCT
OR ANY OTHER INFORMATION COMMUNICATED TO CORIXA BY VAXCEL OR TO VAXCEL
BY CORIXA. SPECIFICALLY, BUT WITHOUT LIMITING THE FOREGOING, VAXCEL
MAKES NO EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS (FOR
A PARTICULAR PURPOSE OR OTHERWISE), QUALITY OR USEFULNESS OF THE
TECHNOLOGY AND CORIXA MAKES NO EXPRESS OR IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS (FOR A PARTICULAR PURPOSE OR OTHERWISE),
QUALITY OR USEFULNESS OF THE CORIXA MATERIAL OR THE PRODUCT. ALL
PHYSICAL EMBODIMENTS OF THE TECHNOLOGY PROVIDED BY VAXCEL HEREUNDER
AND ALL CORIXA MATERIALS PROVIDED BY CORIXA HEREUNDER ARE PROVIDED ON
AN "AS IS" BASIS. VAXCEL DOES NOT WARRANT THE ACCURACY OF ANY
INFORMATION INCLUDED WITHIN THE OPTIVAX INFORMATION NOR DOES VAXCEL
WARRANT THAT ANY SUCH INFORMATION CONSTITUTES TRADE SECRETS OR
CONFIDENTIAL INFORMATION OR THAT THE COPOLYMER PATENTS WILL BE FREE
FROM CLAIMS OF INFRINGEMENT BY THIRD PARTIES OR ANY OTHER RIGHTS OF
THIRD PARTIES. SIMILARLY, CORIXA DOES NOT WARRANT THE ACCURACY OF ANY
INFORMATION INCLUDED WITHIN THE CORIXA MATERIAL INFORMATION NOR DOES
CORIXA WARRANT THAT ANY SUCH INFORMATION CONSTITUTES TRADE SECRETS OR
CONFIDENTIAL INFORMATION OR THAT THE CORIXA MATERIAL PATENTS WILL BE
FREE FROM CLAIMS OF INFRINGEMENT BY THIRD PARTIES OR ANY OTHER RIGHTS
OF THIRD PARTIES.
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UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY
OR ANY THIRD PARTY FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES IN
TORT, CONTRACT, STRICT LIABILITY OR OTHERWISE INCURRED BY OTHER PARTY
OR ANY THIRD PARTY EXCEPT FOR BREACH OF SECTION IX BASED ON GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT AND SOLELY IN CONNECTION WITH CORIXA
MATERIALS OWNED BY CORIXA, EXCEPT FOR BREACH OF SECTION 12.2(IV).
ARTICLE XI
INDEMNITY
11.1 Indemnification by Corixa and Sublicensees
Corixa and the Sublicensees will indemnify and hold harmless CytRx,
Vaxcel, and their Affiliates, employees, officers, directors,
stockholders and agents (a "CytRx / Vaxcel Indemnified Party") from
and against any and all liability, loss, damages, costs, or expenses
(including reasonable attorneys' fees) which the CytRx / Vaxcel
Indemnified Party may incur, suffer or be required to pay resulting
from or arising in connection with: (i) the breach by Corixa of any
covenant, representation or warranty contained in this Agreement; (ii)
the development, clinical testing, manufacturing, marketing, sale or
distribution of the Product(s) by Corixa or the Sublicensees or any
person on behalf of Corixa or the Sublicensees; (iii) the use by any
person of the Product(s) that was manufactured, marketed, sold or
distributed by Corixa, the Sublicensees, or any of their Affiliates;
(iv) the use by Corixa, the Sublicensees, or any of their Affiliates
of the Copolymer or Optivax; (v) the successful enforcement by a CytRx
/ Vaxcel Indemnified Party of any of the foregoing, except that
neither Corixa nor any of the Sublicensees shall have any obligation
to so indemnify or hold harmless for any such liability, loss damages,
cost or expense (including reasonable attorney's fees) resulting from
or arising in connection with the gross negligence or willful
misconduct of a CytRx / Vaxcel Indemnified Party.
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11.2 Indemnification by Vaxcel
Vaxcel shall indemnify and hold harmless Corixa, the Sublicensees and
their Affiliates, employees, officers, directors, stockholders and
agents (a "Corixa Indemnified Party") from and against any and all
liability, loss, damages, costs, or expenses (including reasonable
attorneys' fees) which the Corixa Indemnified Party may incur, suffer
or be required to pay resulting from or arising in connection with:
(i) the breach by Vaxcel of any covenant, representation or warranty
contained in this Agreement, or (ii) the successful enforcement by a
Corixa Indemnified Party of any of the foregoing, except that Vaxcel
shall have no obligation to so indemnify or hold harmless for any such
liability, loss damages, cost or expense (including reasonable
attorney's fees) resulting from or arising in connection with the
gross negligence or willful misconduct of a Corixa Indemnified Party.
11.3 Conditions to Indemnification
The obligations of the indemnifying party under Sections 11.1 and 11.2
are conditioned upon the prompt notification to the indemnifying party
of any of the aforementioned suits or claims in writing within fifteen
(15) days after receipt of notice by the indemnified party of such
suit or claim. The indemnifying party shall have the right to assume
the defense of any such suit or claim unless, in the reasonable
judgment of the indemnified party, such suit or claim involves an
issue or matter which could have a materially adverse effect on the
business, operations or assets of the indemnified party, in which
event the indemnified party may control the defense or settlement
thereof. If the indemnifying party defends the claim, the indemnified
party may participate in the defense of such suit or claim at its sole
cost and expense. This provision for indemnification shall be void
and there shall be no liability against a party as to any suit or
claim for which settlement or compromise or an offer of settlement or
compromise is made without the prior consent of the indemnifying
party.
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ARTICLE XII
REPRESENTATIONS AND WARRANTIES
12.1 Representations and Warranties of Vaxcel
Vaxcel represents and warrants to Corixa as follows:
(i) It is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(ii) The execution and delivery of this Agreement have been
duly and validly authorized, and all necessary action has been
taken to make this Agreement a legal, valid and binding
obligation of Vaxcel enforceable in accordance with its terms.
(iii) The execution and delivery of this Agreement and the
performance by Vaxcel of its obligations hereunder will not
contravene or result in any breach of the Certificate of
Incorporation or Bylaws of Vaxcel or result in any material
breach or violation of or material default under any material
agreement, indenture, license, instrument or understanding or,
to the best of its knowledge, result in any violation of any
law, rule, regulation, statute, order or decree to which
Vaxcel is a party or by which any of them or any of their
property is subject.
(iv) As of the Effective Date, Vaxcel has not received any
notice of any claim that the Copolymer or the Copolymer
Patents infringe upon any third party's know-how, patent or
other intellectual property rights.
(v) Vaxcel possesses all right, title, and interest in and to
the Technology necessary to grant the licenses granted to
Corixa hereunder.
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(vi) Vaxcel has received from CytRx an exclusive, worldwide
right and license, including the right to sublicense on the
terms of the Agreement, to the Copolymer for use as a Human
Vaccine Adjuvant and Vaxcel has full right to practice under
the Copolymer Patents.
(vii) As of the Effective Date, the License Agreement, as
amended and restated on August 10, 1995, between CytRx and
Vaxcel is in full force and effect and grants to Vaxcel all
rights necessary to Corixa's exercise in full of the rights
granted by Vaxcel to Corixa hereunder.
(viii) Vaxcel has no contractual obligations to any third
party that preclude, conflict with or in any way encumber
Vaxcel's right to grant to Corixa the rights and licenses
granted under the Agreement. Vaxcel shall not enter into any
agreement either written or oral that conflicts with the
rights and/or licenses granted to Corixa under the Agreement.
12.2 Representations and Warranties of Corixa
Corixa represents and warrants to Vaxcel as follows:
(i) Corixa is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware.
(ii) The execution and delivery of this Agreement have been
duly and validly authorized, and all necessary action has been
taken to make this Agreement a legal, valid and binding
obligation of Corixa enforceable in accordance with its terms.
(iii) The execution and delivery of this Agreement and the
performance by Corixa of its obligations hereunder will not
contravene, or result in any breach of, the Certificate of
Incorporation or Bylaws of Corixa, or result in any material
breach or violation of or material default under any material
agreement, indenture, license, instrument or understanding or,
to the best of its knowledge, result in any violation of any
law, rule, regulation, statute, order or decree to which
Corixa or any of its Affiliates is a party or by which any of
them or any of their property is subject.
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(iv) Corixa is the owner of record of, and owns all right,
title, and interest in and to, or is the exclusive licensee of
all rights in the Field of, the Corixa Material and the Corixa
Material Patents, and possesses all rights necessary to grant
Vaxcel the rights granted pursuant to this Agreement.
(v) As of the Effective Date, Corixa has not received any
notice of any claim that the Corixa Material or the Corixa
Material Patents infringe upon any third party's know-how,
patent or other intellectual property rights.
(vi) The copies of the Amended and Restated Certificate of
Incorporation and bylaws of Corixa that Corixa has provided to
Vaxcel are true and complete copies of such documents.
(vii) Except as set forth on Exhibit VII hereto, Corixa has no
outstanding Common Stock, Preferred Stock, warrants, options,
or rights for the purchase or acquisition of any Corixa
securities (including conversion or preemptive rights and
rights of first refusal). Except as provided in the Investors'
Rights Agreement attached as Exhibit VIII hereto, Corixa is
presently not under any obligation and has not granted any
rights to register under the Securities Act of 1933, as
amended, any of its presently outstanding securities or any of
its securities that may subsequently be issued.
(viii) Vaxcel has been provided with copies of: (x) an audited
balance sheet of Corixa as of December 31, 1994 and, for the
fiscal year ending on such date, an audited income statement,
together with the notes thereto and reports thereon of
Corixa's independent certified public accountants (the
"Audited Financial Statements"); and (y) the March 21, 1996
drafts of an unaudited balance sheet of Corixa as of December
31, 1995 and, for the fiscal year ending on such date, an
unaudited statement of cash flows and an unaudited statement
of operations. The Audited Financial Statements: (a) are in
accordance with the books and records of Corixa, which have
been properly maintained and are complete and correct in all
material respects; (b) present fairly the financial condition,
assets, and liabilities and results of operations of Corixa as
of the respective dates indicated and
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for the periods indicated; (c) have been prepared in
accordance with generally accepted accounting principles
consistently applied throughout the periods involved; and (iv)
reflect adequate reserves for all known liabilities and
reasonably anticipated losses.
(ix) To Corixa's knowledge, since December 31, 1995, there has
not been any event or condition of any type that has
materially and adversely affected the business, properties,
prospects, assets, liabilities, financial condition or
operating results of Corixa from that reflected on the draft
financial statements referenced in Section 12.2(viii)(y)
hereof.
ARTICLE XIII
MISCELLANEOUS
13.1 Entire Agreement: Amendment
This Agreement, together with the Exhibits annexed hereto sets forth
and constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof, and supersedes any and all prior
agreements, understandings, promises, and representations made by
either party to the other concerning the subject matter hereof and the
terms applicable hereto. This Agreement may not be released,
discharged, amended or modified in any manner except by an instrument
in writing signed by duly authorized representatives of Vaxcel and
Corixa.
13.2 Parties Independent
In making and performing this Agreement, the parties act and shall act
at all times as independent entities and nothing contained in this
Agreement shall be construed or implied to create an agency,
partnership or employer and employee relationship between Vaxcel and
Corixa. Except as specifically provided herein, at no time shall
either party make commitments or incur any charges or expenses for or
in the name of the other party.
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13.3 Effect of Invalidity of Certain Provisions
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability
without rendering invalid or unenforceable the remaining terms and
provisions of this Agreement.
13.4 Governing Law
This Agreement shall be deemed to have been entered into and shall be
construed and enforced in accordance with the laws of the State of
Georgia, without reference to conflict of law principles.
13.5 Waivers
The failure of either party to insist, in any one or more instances,
upon the performance of any of the terms, covenants or conditions of
this Agreement and to exercise any right hereunder, shall not be
construed as a waiver or relinquishment of the future performance of
any such term, covenant or condition or the future exercise of such
right, but the obligations of the other party with respect to such
future performance shall continue in full force and effect.
13.6 Headings
The headings of the articles, sections and paragraphs used in this
Agreement are included for convenience only and are not to be used in
construing or interpreting this Agreement.
13.7 Notice
Any notice or other communication required or permitted to be made or
given to either party hereto pursuant to this Agreement shall be
sufficiently made or given if sent to such party by either telecopy
transmission or certified or registered first class mail, postage
prepaid, return receipt requested addressed to it as follows:
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If to Vaxcel:
Vaxcel, Inc.
154 Technology Parkway
Technology Park / Atlanta
Norcross, GA 30092
Telephone No. (770) 453-0195
Fax No. (770) 453-0194
Attention: President
If to Corixa:
Corixa Corporation
1124 Columbia Street
Suite 464
Seattle, Washington 98104
Telephone No. (206) 667-5717
Fax No. (206) 667-5715
Attention: Chief Operating Officer
or to such other address as either party shall designate by written
notice, similarly given, to the other party. Any notice if given or
made by certified or registered first class mail letter, return
receipt requested, shall be deemed to have been received on the
earlier of the date actually received and the date three (3) days
after the same was posted (and in proving such it shall be sufficient
to prove that the envelope containing the same was properly addressed
and posted as aforesaid) and if given or made by telecopy transmission
shall be deemed to have been received at the time of dispatch, unless
such date of deemed receipt is not a business day, in which case the
date of deemed receipt shall be the next succeeding business day.
13.8 Successors and Assigns
This Agreement shall not be assignable by either party without the
prior written consent of the other party, except that such consent is
not required in connection with the assignment of either party's
rights or obligations hereunder to an Affiliate thereof or to any
successor to substantially all of this Agreement whether as a result
of merger, consolidation or the sale of all or substantially all of
the assets of
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the assigning party. Subject to the foregoing, this Agreement, and
each and every provision hereof, shall be binding upon and shall inure
to the benefit of the parties, their respective successors,
successors-in-title, heirs and assigns, and each and every
successor-in-interest to any party, whether such successor acquires
such interest by way of gift, purchase, foreclosure, or by any other
method, shall hold such interest subject to all the terms and
provisions of this Agreement.
13.9 Counterparts
This Agreement shall become binding when any one or more counterparts
hereof, individually or taken together, shall bear the signatures of
each of the parties hereto. This Agreement may be executed in any
number of counterparts, each of which shall be an original as against
either party whose signature appears thereon, but all of which
together shall constitute but one and the same instrument.
13.10 Force Majeure
The parties shall not be responsible for failure to perform any of the
obligations imposed by this Agreement (except an obligation to pay
money), provided such failure is caused by fire, storms, floods,
strikes, lockouts, accidents, war, riots or civil commotions,
inability to obtain railroad cars or raw materials, embargoes, any
State or Federal regulation, law, or restriction, seizure or
acquisition of the Copolymer, Optivax, the Corixa Material or the
Product(s) by the Government of the United States or of any state, or
of any agency thereof or by reason of any compliance with a demand or
request for such product for any purpose for national defense, or any
other cause or contingency beyond the reasonable control of said party
(whether or not of the same kind or nature as the causes or
contingencies above enumerated) shall not subject the party so failing
to any liability to the other.
13.11 Dispute Resolution
(i) Good Faith Discussions
The parties will attempt to resolve through good faith discussions any
dispute which arises under this Agreement. Any dispute may, at the
election of either
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<PAGE> 53
party, be referred to the chief executive officers of each party. If
they are unable to resolve the dispute within thirty (30) days of
delivery of written notice of the dispute from one party to the other,
either party may seek to resolve it by initiating an Alternative
Dispute Resolution ("ADR") in which the Judicial Arbitration and
Mediation Services ("JAMS"), through a panel of three (3) arbitrators
(the "Arbitrators"), shall control the proceedings as provided herein.
If JAMS is not in existence at the time of such dispute, the American
Arbitration Association shall be substituted. The location of the ADR
shall be Seattle, Washington if the arbitration is initiated (as set
forth below) by Vaxcel, and Atlanta, Georgia if initiated by Corixa.
(ii) Selection of Arbitrators
An ADR shall be initiated by a party by sending written notice thereof
to the other party and JAMS, which shall state the issue(s) to be
resolved. Within ten (10) business days after receipt of such notice,
the other party may, by sending written notice to the initiating party
and JAMS, add issues to be resolved. Within twenty (20) business days
after the date of the original ADR notice, JAMS shall nominate to the
parties at least ten (10) qualified nominees [as set forth in Section
13.11(iii)] from JAMS panel. Each party shall have five (5) business
days after the receipt of such nominations to select one Arbitrator.
The two Arbitrators will then mutually agree on a third Arbitrator to
complete the panel.
(iii) Arbitrators with Special Expertise
Each Arbitrator shall have experience in the Field and with
intellectual property law matters. In the event of a dispute between
the parties relating to the calculation of any royalties or the amount
of other consideration payable under this Agreement (including,
without limitation, the results of any audit conducted on behalf of a
party pursuant to Section 4.9), then, in addition to the
qualifications set forth above and the procedure set forth in Section
13.11(ii), the Arbitrators shall be partners or full members of
internationally recognized certified public accounting firms which are
not auditing firms for either party and have not provided material
services to either party during the last two (2) year period prior to
the date of ADR initiation.
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<PAGE> 54
(iv) ADR Hearing
Except as otherwise provided in this Section 13.11, such hearing shall
be conducted pursuant to the JAMS Rules or the Commercial Arbitration
Rules of the American Arbitration Association (AAA), as applicable.
(v) ADR Ruling; Fees and Expenses
The Arbitrators shall render a disposition of the dispute (including
an award of monetary damages, if applicable) as expeditiously as
possible after the hearing, but not later than fifteen (15) business
days after the conclusion of the hearing. The Arbitrators' disposition
shall be final and not appealable, except that either party shall have
the right to appeal such disposition on the basis it was affected by
fraud or bad faith in connection with the ADR proceeding. A judgment
on the Arbitrators' disposition may be entered in any court having
jurisdiction over the parties. The reasonable fees and expenses of the
Arbitrators, as well as the standard charges of JAMS for its
assistance, shall be borne equally by the parties or as they may
otherwise agree.
(vi) Waiver
A party shall not be prohibited from bringing a claim for resolution
under this Section 13.11 on the ground that the claim could have been
brought during an earlier proceeding under this Section 13.11.
(vii) No Dispute Resolution
The following disputes causes of action or claims shall not be subject
to the dispute resolution process set forth in this Section 13.11:
(i) a claim arising from a suit, action, or proceeding brought
by a third party or Sublicensee not subject to ADR;
(ii) A claim relating to undisputed amounts owed by either
party to the other under this Agreement;
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<PAGE> 55
(iii) a suit, action, or proceeding to compel either party to
comply with the dispute resolution procedures set forth in
this Section 13.11;
(iv) a dispute, controversy, or claim relating to the scope,
enforceability, infringement or validity of a patent or
trademark of either party; and
(v) a cause of action seeking temporary or preliminary
injunction relief.
13.12 Other Copolymers
(i) Notwithstanding that the Copolymer referred to in Section 1.2 is
considered by the parties to be the most appropriate for use in the
Development Program, if Vaxcel acquires or holds rights in any other
copolymer which, in the Research and Development Committee's judgment,
may be useful to the Development Program and the parties wish to
evaluate such copolymer, then Vaxcel shall make such copolymer
available to Corixa for the purposes of this Agreement and such
copolymer shall be deemed to be included within the definition of
Copolymer in Section 1.2 herein.
(ii) In the event a copolymer other than the Copolymer is manufactured
and supplied under this Agreement and the Optivax Supply Agreement,
the parties will meet and negotiate revised prices for such copolymer
under the Optivax Supply Agreement to reflect any changes in the cost
of manufacturing. All other terms of this Agreement and the Optivax
Supply Agreement will remain unchanged.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first above written.
VAXCEL, INC.
By: /s/ PAUL J. WILSON
------------------------------------------
Name: Paul J. Wilson
Title: President and Chief
Executive Officer
CORIXA CORPORATION
By: /s/ MARK MCDADE
------------------------------------------
Name: Mark McDade
Title: Chief Operating Officer
55
<PAGE> 57
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO AN EXEMPTION TO SUCH ACT.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE
SECTION 10-5-9 OF THE "GEORGIA SECURITIES ACT OF 1973," AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT
TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
Void after
April 8, 2006
WARRANT TO PURCHASE UP TO 500,000
SHARES OF SERIES A PREFERRED STOCK
of
CORIXA CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT, for value received, Vaxcel, Inc., a Delaware
corporation (the "Investor") is entitled to subscribe for and purchase, on the
terms hereof, up to Five Hundred Thousand (500,000) shares of Series A Preferred
Stock of Corixa Corporation, a Delaware corporation (the "Company"), with the
designations, powers, preferences, rights, qualifications, limitations and
restrictions set forth in the Company's Amended and Restated Certificate of
Incorporation (the "Restated Certificate") dated December 2, 1994, at the per
share purchase price described in Section 1.4 below, subject to adjustment as
provided herein.
This Warrant is issued pursuant to the provisions of that certain
License Agreement between the Investor and the Company dated April 9, 1996 (the
"License Agreement"), and all terms not otherwise defined herein shall have the
meaning ascribed to such terms in the License Agreement.
In addition, this Warrant is subject to the following terms and
conditions:
<PAGE> 58
1. Exercise of Warrant.
The terms and conditions upon which this Warrant may be exercised, and
the Series A Preferred Stock covered hereby (the "Warrant Stock") may be
purchased, are as follows:
1.1. Term. Subject to the terms hereof, this Warrant may be exercised
in whole or in part in accordance with each of subsections 1.2 (a) - (j) below,
at any time following the occurrence of the event set forth in each respective
subsection (and all other subsections where a previous Milestone has been
completed, but only to the extent that this Warrant has not been exercised
previously), for up to the number of shares of Warrant Stock set forth in such
subsection; provided, however, that the minimum number of shares of Warrant
Stock for which this Warrant may be exercised at any one time is 25,000 shares;
provided further, however, that in no event may this Warrant be exercised later
than 5:00 p.m. (Pacific Standard Time) on April __, 2006.
1.2. Number of Shares. Subject to Sections 1.1 and 1.3 hereof, this
Warrant is exercisable as follows:
(a) For up to 100, 000 shares of the Company's Series A
Preferred Stock at any time following the execution of the License Agreement;
(b) For up to 50,000 shares of the Company's Series A
Preferred Stock at any time following the completion of Milestone #1 in
accordance with the terms of the License Agreement;
(c) For up to 100,000 shares of the Company's Series A
Preferred Stock at any time following the completion of Milestone #2 in
accordance with the terms of the License Agreement;
(d) For up to 75,000 shares of the Company's Series A
Preferred Stock at any time following the completion of Milestone #3 in
accordance with the terms of the License Agreement;
(e) For up to 50,000 shares of the Company's Series A
Preferred Stock at any time following the completion of Milestone #4 in
accordance with the terms of the License Agreement,
(f) For up to 40,000 shares of the Company's Series A
Preferred Stock at any time following the completion of Milestone #5 in
accordance with the terms of the License Agreement;
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<PAGE> 59
(g) For up to 25,000 shares of the Company's Series A
Preferred Stock at any time following the completion of Milestone #6 in
accordance with the terms of the License Agreement;
(h) For up to 30,000 shares of the Company's Series A
Preferred Stock at any time following the completion of Milestone #7 in
accordance with the terms of the License Agreement;
(i) For up to 20,000 shares of the Company's Series A
Preferred Stock at any time following the completion of Milestone #8 in
accordance with the terms of the License Agreement;
(j) For up to 10,000 shares of the Company's Series A
Preferred Stock at any time following the completion of Milestone #9 in
accordance with the terms of the License Agreement; and
provided, however that the above share numbers are also subject to adjustment
pursuant to Section 2 hereof.
1.3. Termination of Entire License Agreement. Upon termination of the
License Agreement, this Warrant is subject to the following additional terms and
conditions:
(a) In the event the License Agreement is terminated pursuant
to subsections 8.3(ii) or 8.4(iv) thereof on account of a breach of the License
Agreement by the Investor, the Investor shall be entitled to exercise this
Warrant for the number of shares of Series A Preferred Stock for which this
Warrant is then exercisable in accordance with Section 1.2 above based on the
Milestones completed prior to such termination; provided, however, that in the
event of any such termination, the Company shall have the right (the "Repurchase
Right"), at the Company's sole discretion, to repurchase all or any portion of
the shares of Series A Preferred Stock purchased by the Investor upon any
exercise of this Warrant at a price per share equal to the Warrant Price (as
defined in Section 1.4 below); provided further, however the Company's
Repurchase Right shall terminate when the Investor no longer holds any shares of
Series A Preferred Stock;
(b) In the event the License Agreement is terminated pursuant
to subsections 8.3(i) or 8.4(iv) thereof on account of a breach of the License
Agreement by the Company, then upon such termination, the Investor shall be
entitled to exercise this Warrant immediately, in whole or in part in accordance
with the number of shares set forth in each of subsections 1.2(a) - (j), for up
to the full 500,000 shares of Series A Preferred Stock for which this Warrant is
exercisable, subject to adjustment pursuant to Section 2 hereof and subject to
the limits set forth in Section 1.1; and
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<PAGE> 60
(c) In the event the License Agreement is terminated for any
reason other than as set forth in subsections 1.3(a) or (b) above, the Investor
shall be entitled to exercise this Warrant for the number of shares of Series A
Preferred Stock for which this Warrant is then exercisable in accordance with
Section 1.2 above based on the Milestones completed prior to such termination;
provided, however, that in the event of any such termination, the Company shall
not have the Repurchase Right set forth in subsection 1.3 (a) hereof.
1.4. Purchase Price. The per share purchase price for the shares of
Series A Preferred Stock to be issued upon exercise of this Warrant (the
"Warrant Price") shall be equal to the lesser of (i) $2.00 or (ii) the per share
price of the equity securities to be issued and sold to investors in the
Company's next equity financing with aggregate proceeds to the Company of at
least $5,000,000 (the "Next Equity Financing"); provided, however, if the
closing of the Next Equity Financing is not consummated on or before June 30,
1996, the Warrant Price shall be $2.00; provided further, however, that the
Warrant Price is subject to further adjustment as provided herein. The Company
hereby agrees that prior to July 1, 1996, the Company will not issue and/or sell
any equity securities of the Company which are convertible into shares of the
Company's Common Stock at a conversion ratio other than one-share-for-one-share.
1.5. Method of Exercise. The exercise of the purchase rights evidenced
by this Warrant shall be effected by (a) the surrender of the Warrant, together
with a duly executed copy of the form of subscription attached hereto
("Subscription Notice"), to the Company at its principal offices and (b) the
delivery of the purchase price by check or bank draft payable to the Company's
order or by wire transfer to the Company's account for the number of shares for
which the purchase rights hereunder are being exercised, or any other form of
consideration approved by the Company's Board of Directors. Each exercise of
this Warrant shall be deemed to have been effected immediately prior to the
close of business on the day on which this Warrant shall have been surrendered
to the Company as provided herein or at such latter date as may be specified in
the executed form of subscription, and at such time the person or persons in
whose name or names any certificate or certificates for shares of Series A
Preferred Stock shall be issuable upon such exercise as provided herein shall be
deemed to have become the holder or holders of record thereof.
1.6. Exercise by Exchange. In addition to and without limiting the
rights of the holder hereof under the terms hereof, if the fair market value of
one share of Series A Preferred Stock is greater than the Warrant Price (at the
date of calculation as set forth below), in lieu of exercising this Warrant for
cash, the holder may elect to receive shares equal to the value (as determined
below) of this Warrant (or the portion of this Warrant being canceled) by
surrender of this Warrant at the principal office of the Company together with
the properly endorsed Subscription Notice and notice of such election in which
event the Company shall issue to the holder the number of shares of Series A
Preferred Stock computed using the following formula:
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X=Y(A-B)
------
A
Where: X = The number of shares of Series A Preferred Stock
(or any shares of stock or other securities at the
time issuable upon exercise of this Warrant) to be
issued to the holder upon such exercise.
Y = The number of shares of Series A Preferred Stock
(or any shares of stock or other securities at the
time issuable upon exercise of this Warrant)
purchasable under the portion of this Warrant being
canceled under this Section 1.6.
A = The fair market value of one share of the Company's
Series A Preferred Stock (or any shares of stock or
other securities at the time issuable upon exercise
of this Warrant).
B = The Warrant Price, as adjusted to the date of such
notice of election.
For purposes of the above calculation, fair market value of one share of Series
A Preferred Stock shall be determined by the Company's Board of Directors in
good faith; provided, however, that in the event the Warrant is exercised in
connection with the Company's Initial Public Offering, the fair market value per
share shall be the product of (i) the per share offering price to the public of
the Initial Public Offering, and (ii) the number of shares of Common Stock into
which each share of Series A Preferred Stock is convertible at the time of such
exercise.
1.7. Issuance of Shares. As soon as reasonably practicable after each
exercise of this Warrant in accordance with Section 1.2 hereof, and in any event
within ten (10) days of the Company's receipt of a duly executed Subscription
Notice, the Company at its expense (including the payment by it of any
applicable issue and documentary stamp taxes) will cause to be issued in the
name of and delivered to the holder hereof, or as such holder (upon payment by
such holder of any applicable transfer taxes) may direct,
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of Series A
Preferred Stock to which such holder shall be entitled upon such exercise, and
(b) in case such exercise is in part in accordance with
Section 1.2 only, a new warrant or warrants with terms consistent with the terms
hereof, representing the portion of Warrant Stock with respect to which this
Warrant shall not then have been exercised.
2. Certain Adjustments.
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<PAGE> 62
2.1. Conversion of Series A Preferred Stock. Should all of the
Company's Series A Preferred Stock be, or if outstanding would be, at any time
prior to the expiration of this Warrant, converted into shares of the Company's
Common Stock in accordance with the Company's Restated Certificate, as amended
and/or restated and effective immediately prior to such conversion of all of the
Company's Series A Preferred Stock (the "Series A Conversion"), then this
Warrant shall immediately become exercisable for that number of shares of the
Company's Common Stock equal to the number of shares of Common Stock which would
have been received if this Warrant had been exercised immediately prior to the
Series A Conversion for that number of shares of Series A Preferred Stock for
which this Warrant is exercisable immediately prior to the Series A Conversion
in accordance with Section 1.2 above based on the Milestones completed
immediately prior to the Series A Conversion, and the Warrant Stock received
thereupon had been simultaneously converted into Common Stock. After the Series
A Conversion, this Warrant shall continue to be exercisable in accordance with
Sections 1.1 and 1.2 above; provided, however, that upon any exercise of this
Warrant after the Series A Conversion, the holder hereof, in lieu of receiving
shares of Series A Preferred Stock, shall receive that number of shares of
Common Stock equal to the number of shares of Common Stock which would have been
received if this Warrant had been exercised for shares of Series A Preferred
Stock in accordance with Section 1.2 above based on the Milestones completed at
the time of exercise and the Warrant Stock received thereupon had been
simultaneously converted into Common Stock. The purchase price per share of
Common Stock shall be immediately adjusted to equal the quotient obtained by
dividing (x) the aggregate purchase price of the number of shares of Series A
Preferred Stock for which this Warrant was exercisable immediately prior to the
Series A Conversion by (y) the number of shares of Common Stock for which this
Warrant is exercisable immediately after the Series A Conversion; provided,
however, that the aggregate purchase price shall not be adjusted.
2.2. Common Stock Dividends. If the Company at any time following the
conversion of all the Series A Preferred Stock and prior to the expiration of
this Warrant shall pay a dividend with respect to Common Stock payable in shares
of Common Stock, then the purchase price per share hereof shall be adjusted,
from and after the date of determination of the stockholders entitled to receive
such dividend, to that price determined by multiplying the per share purchase
price in effect by a fraction (i) the numerator of which shall be the total
number of shares of Common Stock outstanding immediately prior to such dividend,
and (ii) the denominator of which shall be the total number of shares of the
Common Stock outstanding immediately after such dividend; provided, however,
that the aggregate purchase price shall not be adjusted.
2.3. Mergers, Consolidations or Sale of Assets. If at any time after
the date hereof there shall be a capital reorganization (other than a
combination or subdivision of Warrant Stock otherwise provided for herein), or a
merger or consolidation of the Company with or into another corporation, or the
sale of the Company's properties and assets as, or substantially as, an entirety
to any other person, then, as a part of such reorganization, merger,
consolidation or sale, lawful provision shall be made so that the
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<PAGE> 63
holder of this Warrant shall thereafter be entitled to receive upon exercise of
this Warrant, during the period specified in this Warrant and upon payment of
the purchase price, the number of shares of stock or other securities or
property of the Company or the successor corporation resulting from such
reorganization, merger, consolidation or sale, to which a holder of the Series A
Preferred Stock (or Common Stock issuable upon conversion thereof) deliverable
upon exercise of this Warrant would have been entitled under the provisions of
the agreement in such reorganization, merger, consolidation or sale if this
Warrant had been exercised immediately before that reorganization, merger,
consolidation or sale for that number of shares of Series A Preferred Stock for
which this Warrant is exercisable at the time of such exercise in accordance
with Section 1.2 above based on the Milestones completed at the time of such
exercise, all subject to further adjustment as provided in this Section 2. The
foregoing provisions of this Section 2.3 shall similarly apply to successive
reorganizations, consolidations, mergers and sales and to the stock or
securities of any other corporation that are at the time receivable upon
exercise of this Warrant. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant with respect to the rights and
interests of the Investor after the reorganization, merger, consolidation or
sale to the end that the provisions of this Warrant (including adjustment of the
purchase price then in effect and the number of shares of Warrant Stock) shall
be applicable after that event, as near as reasonably may be, in relation to any
shares or other property deliverable after that event upon exercise of this
Warrant; provided, however that the aggregate purchase price shall not be
adjusted.
2.4. Reclassification, etc. If at any time after the date hereof the
Company, by reclassification of securities or otherwise, shall change any of the
securities as to which purchase rights under this Warrant exist into the same or
a different number of securities of any other class or classes, this Warrant
shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Warrant Price
shall be appropriately adjusted, all subject to further adjustment as provided
in this Section 2; provided, however that no such adjustment shall be made
pursuant to this Section 2.4 in connection with any Series A Conversion that is
the subject of Section 2.1 above.
2.5. Splits and Subdivisions. In the event the Company should at any
time or from time to time fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Series A Preferred Stock or the
determination of the holders of Series A Preferred Stock entitled to receive a
dividend or other distribution payable in additional shares of Series A
Preferred Stock or other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly, additional shares of Series A
Preferred Stock (hereinafter referred to as the "Series A Equivalents") without
payment of any consideration by such holder for the additional shares of Series
A Preferred Stock or Series A Equivalents (including the additional shares of
Series A Preferred Stock issuable upon conversion or exercise thereof), then, as
of such record date (or the date of such distribution, split or subdivision if
no record date is fixed), the purchase price per share
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<PAGE> 64
shall be appropriately decreased and the. number of shares of Warrant Stock
shall be appropriately increased in proportion to such increase of outstanding
shares; provided, however that the aggregate purchase price shall not be
adjusted.
2.6. Combination of Shares. If the number of shares of Series A
Preferred Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Series A Preferred Stock, the purchase
price per share shall be appropriately increased and the number of shares of
Warrant Stock shall be appropriately decreased in proportion to such decrease in
outstanding shares; provided, however that the aggregate purchase price shall
not be adjusted.
2.7. Adjustments for Other Distributions. In the event the Company
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by the Company or other persons, assets (excluding cash
dividends) or options or rights not referred to in Sections 2.2, 2.4 or 2.5,
then, in each such case for the purpose of this Section 2.7, upon exercise of
this Warrant, the holder hereof shall be entitled to a proportionate share of
any such distribution as though such holder was the holder of the number of
shares of Series A Preferred Stock of the Company into which this Warrant may be
exercised as of the record date fixed for the determination of the holders of
Series A Preferred Stock of the Company entitled to receive such distribution;
provided, however that the aggregate purchase price shall not be adjusted.
2.8. Certificate as to Adjustments. In the case of each adjustment or
readjustment of the purchase price pursuant to this Section 2, the Company will
promptly compute such adjustment or readjustment in accordance with the terms
hereof and cause a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based
to be delivered to the holder of this Warrant. The Company will, upon the
written request at any time of the holder of this Warrant, furnish or cause to
be furnished to such holder a certificate setting forth:
(a) Such adjustments and readjustments;
(b) The purchase price at the time in effect; and
(c) The number of shares of Warrant Stock and the amount, if
any, of other property at the time receivable upon the exercise of the Warrant.
2.9. No Dilution or Impairment. The Company will not, by amendment of
its Restated Certificate or through any consolidation, merger, reorganization,
transfer of assets, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against dilution or other impairment.
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<PAGE> 65
2.10. Notices of Record Date, etc. In the event of:
(a) Any taking by the Company of a record of the holders of
any class of securities of the Company for the purpose of determining the
holders thereof who are entitled to receive any dividend (other than a cash
dividend payable out of earned surplus at the same rate as that of the last such
cash dividend theretofore paid) or other distribution, or any fight to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other fight; or
(b) Any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of the assets of the Company to any other
person or any consolidation or merger involving the Company; or
(c) Any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
The Company will mail to the holder of this Warrant at least
twenty (20) days prior to the earliest date specified therein, a notice
specifying:
(i) The date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right; and
(ii) The date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding-up is expected to become effective and the record date for determining
stockholders entitled to vote thereon.
3. Fractional Shares. No fractional shares shall be issued in
connection with any exercise of this Warrant. In lieu of the issuance of such
fractional share, the Company shall make a cash payment equal to the then fair
market value of such fractional share as determined in good faith by the
Company's Board of Directors.
4. Privilege of Stock Ownership. Except as otherwise provided hereby
and prior to the exercise of this Warrant, the Investor shall not be entitled,
by virtue of holding this Warrant, to any rights of a stockholder of the
Company, including (without limitation) the right to vote, receive dividends or
other distributions, exercise preemptive rights or be notified of stockholder
meetings, and such holder shall not be entitled to any notice or other
communication concerning the business or affairs of the Company. Nothing in this
Section 4, however, shall limit the right of the Investor to participate in
distributions to the extent set forth in Section 2 hereof if the Investor
ultimately exercises this Warrant, or be provided the notices described in
Section 2 hereof.
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<PAGE> 66
5. Limitation of Liability. Except as otherwise provided herein, in the
absence of affirmative action by the holder hereof to purchase the Warrant
Stock, no mere enumeration herein of the rights or privileges of the holder
hereof shall give rise to any liability of such holder for the purchase price or
as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
6. Representations and Warranties of the Company.
6.1. Authorization. The Company has full power and authority to enter
into this Warrant. This Warrant has been duly authorized, executed and delivered
by the Company and constitutes its valid and legally binding obligation,
enforceable in accordance with its terms.
6.2. Reservation of Series A Preferred Stock and Common Stock. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Series A Preferred Stock and Common Stock, solely for the
purpose of effecting the exercise of this Warrant, such number of its shares of
Series A Preferred Stock (and Common Stock issuable upon conversion of the
Series A Preferred Stock), as shall from time to time be sufficient to effect
the exercise of this Warrant, and if at any time the number of authorized but
unissued shares of Series A Preferred Stock or Common Stock shall not be
sufficient to effect the exercise of the entire Warrant and the conversion of
the Series A Preferred Stock thereafter, in addition to such other remedies as
shall be available to the holder of this Warrant, the Company will use its best
efforts to take all corporate action as may be necessary to increase its
authorized but unissued shares of Series A Preferred Stock and/or Common Stock,
as applicable, to such number of shares as shall be sufficient for such
purposes.
6.3. Valid Issuance. This Warrant, when issued and delivered in
accordance with the terms hereof, and the Warrant Stock, when issued pursuant to
the terms hereof and upon payment of the exercise price, shall, upon such
issuance, be duly authorized, validly issued, fully paid and nonassessable and
free from all liens.
7. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company with respect to the issuance of the
Warrant and the purchase of the Warrant Stock as follows:
7.1. Authorization. The Investor has full power and authority to enter
into this Warrant. This Warrant has been duly authorized, executed and delivered
by such Investor and constitutes its valid and legally binding obligation,
enforceable in accordance with its terms.
7.2. Purchase Entirely for Own Account. This Warrant is made with the
Investor in reliance upon such Investor's representation to the Company, which
by such Investor's execution of this Warrant such Investor hereby confirms, that
the Warrant and the Warrant Stock will be acquired for investment for such
Investor's own account, not as
- 10 -
<PAGE> 67
a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same in violation
of the federal or state securities laws. The Investor further represents that
such Investor does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or to
any third person with respect to the Warrant or the Warrant Stock.
7.3. Investment Experience. The Investor acknowledges that it is able
to fend for itself, can bear the economic risk of its investment and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Warrant and the Warrant
Stock. The Investor also represents it has not been organized solely for the
purpose of acquiring the Warrant or the Warrant Stock.
7.4. Accredited Investor. The Investor is an accredited investor as
defined in Rule 501 (a) of Regulation D, as amended, promulgated under the Act,
and agrees not to sell, hypothecate, pledge or otherwise dispose of any interest
in the Warrant and the Warrant Stock in the United States, its territories,
possessions or any area subject to its jurisdiction, or to any person who is a
national thereof or resident therein (including any estate of such person), or
any corporation, partnership or other entity created or organized therein,
unless such securities have been either registered under the Act, or are exempt
from the registration requirements of the Act, in an opinion of counsel
reasonably satisfactory to the Company, and the Investor has complied with any
restrictions on transfer contained in this Warrant.
7.5. Restricted Securities. The Investor understands that the Warrant
being issued hereunder and the Warrant Stock to be purchased hereunder are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering, and that under such laws and applicable regulations
such securities may be resold without registration under the Act only in certain
limited circumstances. In this connection, the Investor represents that it is
familiar with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
7.6. Legends. It is understood that the certificates evidencing the
Warrant Stock may bear one or all of the following legends:
1. "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO AN EXEMPTION TO SUCH
ACT."
- 11 -
<PAGE> 68
2. "THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON
PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE "GEORGIA SECURITIES ACT OF 1973,"
AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER
SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT."
3. Any other legend required by the laws of any state in which
the securities will be issued.
7.7. Consents. No consent, approval or authorization of or designation,
declaration or filing with any state, federal or foreign governmental authority
on the part of the Investor is required in connection with the valid execution
and delivery of this Warrant and the consummation of the transactions
contemplated hereby.
8. Market Stand-Off Agreement. The Investor hereby agrees that, during
the period of duration specified by the Company or an underwriter of capital
stock or other securities of the Company, following the effective date of a
registration statement of the Company filed under the Act, it shall not, to the
extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except capital stock included in such
registration; provided, however, that:
(a) all executive officers and directors of the Company and
all other persons with registration rights enter into similar agreements; and
(b) such period shall not exceed one hundred eighty (180) days
beginning the day after the effective date of such registration statement.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Warrant Stock of the
Investor until the end of such period.
9. Transfers and Exchanges.
9.1. This Warrant shall not be transferable without the prior written
consent of the Company, which consent will not be unreasonably withheld.
9.2. All new warrants issued in connection with transfers or exchanges
shall be identical in form and provision to this Warrant except as to the number
of shares of Warrant Stock.
- 12 -
<PAGE> 69
9.3. It shall be a condition to any transfer or exercise of this
Warrant that the Company shall have received, at the time of such transfer or
exercise, a statement in writing of the pertinent facts covering any proposed
distribution thereof. It shall be a further condition to any transfer of this
Warrant or of any or all of the shares of Series A Preferred Stock issued upon
exercise of this Warrant (or Common Stock issuable upon conversion of the Series
A Preferred Stock), other than a transfer registered under the Act, that the
Company shall have received (i) a legal opinion, in form and reasonably
substance satisfactory to the Company and its counsel, reciting the pertinent
circumstances surrounding the proposed transfer and stating that such transfer
is exempt from the prospectus and the registration requirements of the Act and
(ii) a statement in writing from, and signed by, any proposed transferees
containing the same representations and warranties as set forth in Section 7
hereof. The requirement of a legal opinion shall not apply to the transfer of
this Warrant or any part thereof to a partnership of which the Investor is a
partner or to the beneficial owners or affiliates of such partnership without
further consideration, so long as such transfer is in compliance with applicable
securities laws. Each certificate evidencing the shares of Series A Preferred
Stock issued upon exercise of this Warrant (or Common Stock issuable upon
conversion of the Series A Preferred Stock), or upon any transfer of such shares
(other than a transfer registered under the Act or any subsequent transfer of
shares so registered) shall, at the option of the Company, contain a legend, in
form and substance satisfactory to the Company and its counsel, restricting the
transfer of such shares to sales or other dispositions exempt from the
requirements of the Act.
It shall be a further condition to each such transfer that the
transferee shall receive and accept a Warrant, of like tenor and date, executed
by the Company.
10. Successors and Assigns. The terms and provisions of this Warrant
shall be binding upon the Company and the Investor and their respective
successors and assigns, subject at all times to the restrictions set forth
herein and in the License Agreement.
11. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new warrant of like tenor and dated as of such
cancellation, in lieu of this Warrant.
12. Saturday, Sunday, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be Saturday or Sunday or shall be a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding business day
not a legal holiday.
13. Amendments and Waivers. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or in
a
- 13 -
<PAGE> 70
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Investor. Any such amendment or waiver
shall be binding on the parties.
14. Notices. Except as otherwise set forth herein, all notices and
other communications under this Warrant shall be in writing and shall be mailed
by registered or certified mail, return receipt requested, addressed (a) if to
any holder of any Warrant, at the registered address of such holder as set forth
in the register kept at the principal office of the Company, or (b) if to the
Company, to the attention of its President at its principal office; provided,
however, that the exercise of any Warrant shall be effective in the manner
provided in Section 1 hereof
15. Registration Rights. The Company hereby agrees to do and take all
actions necessary to amend the Company's Amended and Restated Investors' Rights
Agreement dated December 2, 1994 (the "Rights Agreement") to include the Warrant
Stock to be issued upon exercise of this Warrant in the definition of
Registrable Securities (the "Amendment") by no later than May 31, 1996. The
Amendment shall include a provision stating that in the event this Warrant is
transferred to a third party in whole but not in part before any exercise
hereof, then the rights granted to the Warrant Stock pursuant to the Rights
Agreement shall also be transferred to such third party.
16. Governing Law. The terms and conditions of this Warrant shall be
governed by and construed in accordance with Delaware law as such laws are
applied to agreements which are entered into solely between Delaware residents
and are to be performed entirely within the state.
- 14 -
<PAGE> 71
Dated: April 9, 1996 CORIXA CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
---------------------------
Address: 1124 Columbia Street
Suite 464
Seattle, WA 98104
ACKNOWLEDGED AND AGREED
VAXCEL, INC.
By:
-----------------------------
Name.
-----------------------------
Title:
-----------------------------
Address: 154 Technology Parkway
Technology Park/Atlanta
Norcross, GA 30092
SIGNATURE PAGE TO WARRANT TO PURCHASE UP TO
500,000 SHARES OF SERIES A PREFERRED STOCK
OF CORIXA CORPORATION
- 15 -
<PAGE> 72
SUBSCRIPTION
Corixa Corporation
- -------------------
- -------------------
- -------------------
Ladies and Gentlemen:
The undersigned, _______________, hereby elects to purchase, pursuant
to the provisions of the Warrant dated April __,1996 held by the undersigned,
__________ shares of the Series A Preferred Stock of Corixa Corporation, a
Delaware corporation, and tenders herewith payment of the purchase price of such
shares in full.
The undersigned hereby confirms and acknowledges the investment
representations and warranties made in Section 7 of the Warrant and accepts such
shares subject to the restrictions of the Warrant, copies of which are available
from the Secretary of the Company.
---------------------
Dated: By:
------------------,----- --------------
Name:
--------------
Title:
--------------
Address:
--------------
--------------
--------------
- 16 -
<PAGE> 73
EXHIBIT III
DESCRIPTION OF THE COPOLYMER
CRL-1005 is a synthetic, linear, nonionic, triblock copolymer consisting of
polyoxypropylene (POP) and polyoxyethylene (POE). The material is synthesized
so that one central hydrophobic block of POP is positioned between two smaller
hydrophilic blocks of POE within each molecule. Thus, each molecule has an
amphipathic structure. CRL-1005 has an average molecular weight of
approximately 12,000 daltons. The POP block comprises about 95% of each
molecule of CRL-1005 and the two POE blocks represent about 5%.
III-1
<PAGE> 74
EXHIBIT IV
SUMMARY OF THE COPOLYMER PATENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
U.S. FILING U.S. SERIAL CURRENT
TITLE DATE NUMBER STATUS
- ----- ---- ------ ------
<S> <C> <C> <C>
Polyoxypropylene/Polyoxyethylene
Block Copolymers 8/94 08/292,814 Pending
Nonionic Block Copolymers 8/94 08/472,511 Pending
Novel Vaccine Adjuvant and Vaccine 8/95 08/513,162 Pending
- -------------------------------------------------------------------------------------------------
</TABLE>
The three U.S. Patent Applications noted above were filed on high molecular
weight copolymers, including the Copolymer as defined in Section 1.2 of the
Agreement and as more specifically described in Exhibit III. These three
applications for high molecular weight copolymers contain claims for: (i)
composition of matter; (ii) a method of manufacturing; and (iii) use as
adjuvants / delivery systems with a wide variety of antigens. When combined
with an antigen, the high molecular copolymers can either be formulated alone
in an aqueous solution or combined with other ingredients (e.g., emulsions) in
a final vaccine product.
These patent applications were also filed under the Patent Cooperation Treaty
(PCT) in August 1995. All countries were designated.
IV-1
<PAGE> 75
EXHIBIT V
CORIXA CANCER ANTIGEN PATENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PATENT NO. / APP. NO. COUNTRY FILING / ISSUE DATE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
THE UNIVERSITY OF
WASHINGTON PATENTS
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/414,417 United States Filed 3/31/95
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/467,083 United States Filed 6/6/95
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/466,680 United States Filed 6/6/95
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/468,545 United States Filed 6/6/95
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/486,348 United States Filed 6/7/95
- ----------------------------------------------------------------------------------------------------
THE WRF PATENTS
- ----------------------------------------------------------------------------------------------------
Pat. No. 5,320,947 United States Issued 6/14/95
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/251,590 United States Filed 5/31/94
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/469,081 United States Filed 6/5/95
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/466,224 United States Filed 6/5/95
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/473,762 United States Filed 6/7/95
- ----------------------------------------------------------------------------------------------------
Pat. No. 639311 Australia Issued 11/12/93
- ----------------------------------------------------------------------------------------------------
Ser. No. 2,074,720-0 Canada Filed 1/24/91
- ----------------------------------------------------------------------------------------------------
Ser. No. 3-504130 Japan Filed 1/24/91
- ----------------------------------------------------------------------------------------------------
Ser. No. 91903946.1 EPO Filed 1/24/91
- ----------------------------------------------------------------------------------------------------
Ser. No. 94109426.01 EPO Filed 1/24/91
- ----------------------------------------------------------------------------------------------------
THE UNIVERSITY OF
PITTSBURGH PATENTS
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/099,354 United States Filed 7/30/93
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/288,059 United States Filed 8/10/94
- ----------------------------------------------------------------------------------------------------
PCT/US94/08477 PCT Filed 7/29/94
- ----------------------------------------------------------------------------------------------------
</TABLE>
V-1
<PAGE> 76
EXHIBIT V (CON'T)
CORIXA CANCER ANTIGEN PATENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PATENT NO. / APP. NO. COUNTRY FILING / ISSUE DATE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
THE CORIXA PATENTS
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/282,845 United States Filed 7/28/94
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/523,436 United States Filed 9/22/95
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/533,669 United States Filed 9/22/95
- ----------------------------------------------------------------------------------------------------
Ser. No. _______(1) United States Invention disclosure complete;
patent application to be filed
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/519,196 United States Filed 8/24/95
- ----------------------------------------------------------------------------------------------------
Ser. No. _______(2) United States Filed 1/10/96
- ----------------------------------------------------------------------------------------------------
Ser. No. _______(3) United States Filed 1/10/96
- ----------------------------------------------------------------------------------------------------
Ser. No. _______(4) United States Invention disclosure complete;
patent application to be filed
- ----------------------------------------------------------------------------------------------------
Ser. No. _______(5) United States Invention disclosure complete;
patent application to be filed
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Compounds and Methods for Immunotherapy and Diagnosis of Tuberculosis
(2) Compositions and Methods for the Treatment and Diagnosis of Cancer
(3) Compositions and Methods for the Treatment and Diagnosis of Breast Cancer
(4) Human Prostatic Adenocarcinoma Antigen Immunologically Related to Rat
Prostate Steroid Binding Protein
(5) Expression Cloning of LNCAP cDNA Library with Human Prostatitis Sera
CORIXA LEIF ADJUVANT PATENTS
U.S. Patent App. Ser. No. 08/232,534, A Leishmania Antigen Homologous to eIF4A
U.S. Patent App. Ser. No. 08/454,036, Compounds and Methods for the Stimulation
and Enhancement of Protective Immune Responses and IL-12 Production
U.S. Patent App. Ser. No. 08/488,386, Methods for Enhancement of Protective
Immune Responses
V-2
<PAGE> 77
EXHIBIT V (CON'T)
CORIXA MICROSPHERES PATENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
SOUTHERN RESEARCH INSTITUTE
- ----------------------------------------------------------------------------------------------------
PATENT NO. / APP. NO. COUNTRY FILING / ISSUE DATE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
PAT. NO. 4,897,268 UNITED STATES ISSUED 1/30/90
- ----------------------------------------------------------------------------------------------------
Pat. No. 302,582 B EPO Issued 7/27/94
- ----------------------------------------------------------------------------------------------------
Pat. No. 1302260 Canada Issued 6/2/92
- ----------------------------------------------------------------------------------------------------
Pat. No. 611662 Australia Issued 10/14/91
- ----------------------------------------------------------------------------------------------------
Pat. No. 86221 Israel Issued 4/28/88
- ----------------------------------------------------------------------------------------------------
Pat. No. 238,727 Argentina Issued 4/28/89
- ----------------------------------------------------------------------------------------------------
Ser. No. 8801242 Brazil Filed 8/88
- ----------------------------------------------------------------------------------------------------
Ser. No. 634591 Japan Filed 8/88
- ----------------------------------------------------------------------------------------------------
Pat. No. 162898 Mexico Issued 7/8/91
- ----------------------------------------------------------------------------------------------------
Pat. No. 24813 Philippines Issued 10/30/90
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Pat. No. 225608 New Zealand Issued 5/9/91
- ----------------------------------------------------------------------------------------------------
Ser. No. 594,142 Canada Filed 3/15/89
- ----------------------------------------------------------------------------------------------------
Ser. No. 826/89 Ireland Filed 3/15/89
- ----------------------------------------------------------------------------------------------------
Pat. No. 89602 Israel Issued 10/10/93
- ----------------------------------------------------------------------------------------------------
Ser. No. 89103098.0 China Filed 3/18/89
- ----------------------------------------------------------------------------------------------------
Pat. No. 48309 Taiwan Issued 6/1/91
- ----------------------------------------------------------------------------------------------------
Pat. No. 169330 India Issued 3/16/91
- ----------------------------------------------------------------------------------------------------
Pat. No. 228376 New Zealand Issued 4/92
- ----------------------------------------------------------------------------------------------------
Ser. No. 241319 New Zealand Filed 1/16/92
- ----------------------------------------------------------------------------------------------------
Pat. No. 241320 New Zealand Issued 3/27/89
- ----------------------------------------------------------------------------------------------------
Pat. No. 89/2103 South Africa Issued 3/19/90
- ----------------------------------------------------------------------------------------------------
Ser. No. PCT/US89/01083 PCT Filed 3/16/89
- ----------------------------------------------------------------------------------------------------
Ser. No. 8902746.6 EPO Filed 3/20/89
- ----------------------------------------------------------------------------------------------------
Pat. No. 633483 Australia Issued 3/18/88
- ----------------------------------------------------------------------------------------------------
Ser. No. 2224/90 Denmark Filed 9/17/90
- ----------------------------------------------------------------------------------------------------
</TABLE>
V-3
<PAGE> 78
EXHIBIT V (CON'T)
CORIXA MICROSPHERES PATENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PATENT NO. / APP. NO. COUNTRY FILING / ISSUE DATE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Ser. No. 50367/89 Japan Filed 9/18/90
- ----------------------------------------------------------------------------------------------------
Ser. No. 89-702165 Korea Filed 11/18/89
- ----------------------------------------------------------------------------------------------------
Ser. No. 4831769.15 Russian Federation Filed 9/17/90
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
PAT. NO. 5,075,109 UNITED STATES ISSUED 12/21/91
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/116,484 United States Filed 9/4/93
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/116,802 United States Filed 9/4/93
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/468,064 United States Filed 6/6/95
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/467,314 United States Filed 6/6/95
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/469,218 United States Filed 6/6/95
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/469,463 United States Filed 6/6/95
- ----------------------------------------------------------------------------------------------------
Ser. No. 87309286.0 EPO Filed 10/21/87
- ----------------------------------------------------------------------------------------------------
Pat. No. 1,331,738 Canada Issued 8/30/94
- ----------------------------------------------------------------------------------------------------
Ser. No. 79929/87 Australia Filed 10/19/87
- ----------------------------------------------------------------------------------------------------
Ser. No. 88102219.5 China Filed 4/9/88
- ----------------------------------------------------------------------------------------------------
Ser. No. 5577/87 Denmark Filed 10/23/87
- ----------------------------------------------------------------------------------------------------
Pat. No. 1770283 India Issued 7/92
- ----------------------------------------------------------------------------------------------------
Ser. No. 2851/87 Ireland Filed 10/23/87
- ----------------------------------------------------------------------------------------------------
Pat. No. 923,159 Israel Issued 6/11/91
- ----------------------------------------------------------------------------------------------------
Ser. No. 2667111/87 Japan Filed 10/23/87
- ----------------------------------------------------------------------------------------------------
Pat. No. 37036 South Korea Issued 5/21/90
- ----------------------------------------------------------------------------------------------------
Pat. No. 222,278 New Zealand Issued 10/22/87
- ----------------------------------------------------------------------------------------------------
Pat. No. 87/7946 South Africa Issued 6/29/88
- ----------------------------------------------------------------------------------------------------
Pat. No. 47224 Taiwan Issued 4/21/91
- ----------------------------------------------------------------------------------------------------
</TABLE>
V-4
<PAGE> 79
EXHIBIT V (CON'T)
CORIXA MICROSPHERES PATENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PATENT NO. / APP. NO. COUNTRY FILING / ISSUE DATE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
PAT. NO. 5,407,609 UNITED STATES ISSUED 4/18/95
- ----------------------------------------------------------------------------------------------------
Ser. No. PCT/US90/02439 PCT Filed 5/2/90
- ----------------------------------------------------------------------------------------------------
Ser. No. 90908830.4 EPO Filed 9/25/91
- ----------------------------------------------------------------------------------------------------
Ser. No. 2,050,911 Canada Filed 9/30/91
- ----------------------------------------------------------------------------------------------------
Ser. No. 915129 Finland Filed 10/30/91
- ----------------------------------------------------------------------------------------------------
Ser. No. 91-701573 South Korea Filed 10/31/91
- ----------------------------------------------------------------------------------------------------
Ser. No. 508473/90 Japan Filed 11/5/91
- ----------------------------------------------------------------------------------------------------
Ser. No. 91.4292 Norway Filed 11/1/91
- ----------------------------------------------------------------------------------------------------
Pat. No. 1000614 Greece Issued 5/3/90
- ----------------------------------------------------------------------------------------------------
Ser. No. 1616/90 Ireland Filed 5/3/90
- ----------------------------------------------------------------------------------------------------
Ser. No. 94296 Israel Filed 5/4/90
- ----------------------------------------------------------------------------------------------------
Ser. No. 20594 Mexico Filed 5/4/90
- ----------------------------------------------------------------------------------------------------
Pat. No. 233570 New Zealand Issued 5/4/90
- ----------------------------------------------------------------------------------------------------
Pat. No. 90/3411 South Africa Issued 2/27/91
- ----------------------------------------------------------------------------------------------------
Ser. No. 341/MAS/90 India Filed 5/4/90
- ----------------------------------------------------------------------------------------------------
Pat. No. 50062 Taiwan Issued 7/11/91
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
DANA FARBER CANCER RESEARCH
INSTITUTE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Ser. No. 08/425,679 United States Filed 4/18/95
- ----------------------------------------------------------------------------------------------------
Ser. No. 08/481,327 United States Filed 9/15/95
- ----------------------------------------------------------------------------------------------------
Ser. No. 9460865 Australia Filed 8/15/94
- ----------------------------------------------------------------------------------------------------
Ser. No. 9407191 EPO Filed 10/25/95
- ----------------------------------------------------------------------------------------------------
</TABLE>
V-5
<PAGE> 80
EXHIBIT VII
CORIXA CORPORATION
CAPITALIZATION SUMMARY
<TABLE>
<S> <C> <C>
SUMMARIZED BY INVESTOR-TYPE
- -----------------------------------------------------------------------
Venture Capital 21,052,289 74.15%
- -----------------------------------------------------------------------
Founders/Options 5,691,711 20.05%
- -----------------------------------------------------------------------
* Other Investors 1,646,737 5.80%
- -----------------------------------------------------------------------
28,390,737 100.00%
=====================================
SUMMARIZED BY SECURITIES-TYPE
- -----------------------------------------------------------------------
Preferred Stock 15,332,279 54.00%
- -----------------------------------------------------------------------
* Common Stock 8,376,311 29.50%
- -----------------------------------------------------------------------
* Warrants 2,355,907 8.30%
- -----------------------------------------------------------------------
Options 2,326,240 8.19%
- -----------------------------------------------------------------------
28,390,737 100.00%
=====================================
</TABLE>
* Note: includes contingent warrants of up to 887,362 (incl. Vaxcel @ 500,000)
and contingent common shares of up to 150,000 shares.
VII-1
<PAGE> 1
EXHIBIT 10.14
VAXCEL / MEDEVA OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Agreement") is made and executed on October 13th,
1995 (the "Effective Date") by and between VAXCEL, INC., having a principal
place of business at 154 Technology Parkway, Technology Park/Atlanta, Norcross,
Georgia 30092 ("Vaxcel") and MEDEVA EUROPE LIMITED, having a principal place of
business at Evans House, Regent Park, Kingston Road, Leatherhead, Surrey KT22
7PQ ("Medeva").
RECITALS
WHEREAS, CytRx Corporation ("CytRx") owns certain patents and patent
applications related to a copolymer known as CRL-1005 and its use as a vaccine
adjuvant as listed in Part I of Appendix 1 to this Agreement;
WHEREAS, CytRx granted to Vaxcel an exclusive, worldwide license in and to such
rights in accordance with the terms of a License Agreement amended and restated
on August 10, 1995, ("License Agreement") to develop and commercially exploit
such patents and patent applications for use as a vaccine adjuvant in humans;
WHEREAS, the License Agreement is in force and the terms thereof permit and
authorize Vaxcel freely to grant sublicenses of the rights granted to it under
such License Agreement for the purposes contemplated by this Agreement;
WHEREAS, Vaxcel owns certain technology and other rights related to CRL-1005
and its use as a vaccine adjuvant as listed in Part II of Appendix 1 to this
Agreement;
WHEREAS, Medeva possesses the know-how and capability for manufacturing,
marketing, and distributing an influenza virus vaccine according to certain
product approvals and establishment licenses issued by the United States Food
and Drug Administration, the Medicines Control Agency of the United Kingdom,
and certain other regulatory agencies in other countries; and
Page 1
<PAGE> 2
WHEREAS, both parties wish to evaluate Vaxcel's Optivaxa System for its ability
to enhance the immune response of Medeva's influenza virus vaccine in
preclinical and Phase I human clinical trials, and if such trials are
successful, negotiate and conclude definitive licensing and supply agreements
covering further development, manufacturing, distribution, and marketing of
Vaxcel's Optivax System with Medeva's influenza virus vaccine.
NOW THEREFORE, in consideration of their mutual promises and intending to be
legally bound, Vaxcel and Medeva hereby agree to the following terms and
conditions:
ARTICLE 1
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 "Affiliate" shall mean, when used with reference to a specified
entity, any person or entity directly or indirectly controlling, controlled by,
or under common control with the specified entity. For purposes of this
Agreement, the direct or indirect ownership of over 50% of the outstanding
voting shares of an entity, or the right to receive over 50% of the profits or
earnings of an entity, or the right to direct the affairs of a person or
entity, shall be deemed to constitute control.
1.2 "Antigen" shall mean Fluvirina, a purified-surface-antigen influenza
virus vaccine, manufactured, distributed, and marketed by Medeva or its
Affiliates.
1.3 "Confidential Information" is defined in Section 8.3 below.
1.4 "Copolymer" shall mean the polyoxyethylene/polyoxypropylene copolymer
designated by Vaxcel as CRL-1005, as more specifically described in Appendix 2,
and any other copolymers added to the Program in accordance with Section 2.2
(iii).
Page 2
<PAGE> 3
1.5 "Development Cost Estimate" shall mean the estimated costs of the
Program to be incurred by Medeva and Vaxcel in performing the Work Plan under
this Agreement, as shown on Appendix 3 hereto.
1.6 "Development Option" is defined in Section 5.1 below.
1.7 "FDA" shall mean the United States Food and Drug Administration or any
successor agency thereto.
1.8 "Field" shall mean use of the Copolymer and/or Optivax System in an
injectable subunit, split, whole cell or otherwise inactivated influenza virus
vaccine in humans. The term "Field" excludes any other uses of the Copolymer
and/or Optivax System, and specifically excludes: (a) use for injectable
delivery of antigens other than influenza virus; (b) use for oral, mucosal, or
other noninjectable routes of delivery of any antigens, including influenza
virus; and (c) use for delivery of next generation influenza virus vaccines
based on recombinant DNA in a protein expression system or synthetic
peptides/proteins.
1.9 "Improvements" is defined in Section 10.4 below.
1.10 "MCA" shall mean the Medicines Control Agency of the United Kingdom or
any successor agency thereto.
1.11 "Optivaxa System" shall mean the Copolymer in a medium which, when
combined with an antigen in a vaccine formulation, will enhance the immune
response that is specific for that antigen.
1.12 "Product" shall mean the vaccine in which the Antigen is the antigen
incorporated or combined with the Optivax System under this Agreement to
produce the enhanced immune response referred to in Section 1.11 above.
1.13 "Program" shall mean the collaboration between Vaxcel and Medeva for
evaluation of the Product through Phase I human clinical trials in accordance
with the Work Plan.
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1.14 "Program Completion Date" shall mean the date when Phase I clinical
trials have been completed or when the Agreement is terminated pursuant to
Article 9, if earlier. The Phase I clinical trials shall be deemed complete
ninety (90) days after the last patient in the trials is vaccinated with the
Product.
1.15 "Program Information" shall mean any Technical Information developed
by either party in the course of carrying out the Program. Program Information
shall include any methods for Product development, formulation or manufacture
developed for, under or as a result of the Program and information arising
directly therefrom.
1.16 "Program Period" shall mean the time during which the Program is
conducted, which shall be from the Effective Date to the Program Completion
Date.
1.17 "Rights" shall mean the patents, patent applications, technology and
other rights listed in Appendix 1 to this Agreement.
1.18 "Technical Information" shall mean technology and information,
know-how, trade secrets, and data relating to the Antigen, Copolymer, Optivax
System, or Product, including improvements and modifications to any thereof,
necessary or useful to the Program, which a party hereto has the lawful and
contractual right to disclose to the other party. Technical Information shall
include, without limitation, processes and analytical methodologies used in
development, testing, analysis and manufacture, and medical, clinical,
toxicological and other scientific data. Notwithstanding the foregoing,
Technical Information shall not include patents or trademarks.
1.19 "Work Plan" shall mean the development plan and related timetable
necessary to conduct the Program, the current version of which is attached
hereto as Appendix 3 and which may be amended from time to time by the mutual
written agreement of the parties.
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ARTICLE 2
MEDEVA'S PARTICIPATION
2.1 Subject to the terms and conditions herein, Vaxcel hereby grants
Medeva the right under the Rights to evaluate the Product according to the Work
Plan during the Program Period.
2.2 (i) Nothing in this Agreement shall be construed to constitute a grant
to Medeva of any rights other than those expressly granted herein.
Specifically, Medeva shall not have the right to use the Optivax System or the
Copolymer: (a) with antigens other than the Antigen; (b) to immunize
individuals for the purpose of producing antibodies which will subsequently be
purified and concentrated to make a high titer, human immune globulin for
commercial sale; and (c) in any testing or analysis that would reverse engineer
or otherwise reveal the chemical or structural composition of the Copolymer or
the Optivax System, excepted as provided for in Section 2.3. In addition,
Vaxcel shall supply all of Medeva's requirements of the Copolymer during the
Program. Nothing in this Agreement shall be construed to constitute a grant to
Medeva of the right to manufacture the Copolymer either directly or through a
third party.
(ii) Nothing in this Agreement shall be construed to constitute a
grant to Vaxcel of any rights other than those expressly granted herein.
Specifically, Vaxcel shall not have any rights over or in respect of or
connected to the Antigen, its manufacture, use or sale.
(iii) Notwithstanding that the Copolymer referred to in Appendix 2 is
considered by the parties to be the most appropriate for use in the Program, if
Vaxcel acquires or holds rights in any other copolymer which, in Vaxcel's sole
judgment, may be useful to the Program and Medeva wishes to evaluate such
copolymer, then Vaxcel shall make such copolymer available to Medeva for the
purposes of this Agreement and such copolymer shall be deemed to be included
within the definition of "Copolymer" in Section 1.4 above.
2.3 Vaxcel shall prepare responses or conduct tests on the Copolymer
and/or Optivax System as required by regulatory authorities; provided, however,
that if regulatory authorities require Medeva to carry out its own testing
and/or analysis of the Copolymer or Optivax System, Medeva shall notify Vaxcel
of such requirement and Vaxcel shall permit and enable Medeva to do what may be
necessary to satisfy the requirements of such regulatory authorities.
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ARTICLE 3
PRODUCT DEVELOPMENT WORK PLAN
3.1 Upon execution of this Agreement, Vaxcel and Medeva shall commence the
Program pursuant to the Work Plan. Each party agrees to use its reasonable
efforts to diligently perform the Work Plan.
3.2 The parties agree that the Work Plan and the Development Cost Estimate
on Appendix 3 are reasonable estimates of the effort and costs required to
evaluate the Product.
3.3 Neither party shall deviate from the Work Plan in any material way nor
incur costs for which they are not responsible in excess of the Development
Cost Estimate, without the prior written consent of the other party.
3.4 If either party believes it necessary (and so notifies the other
party) to materially revise either the Work Plan or the Development Cost
Estimate, so that Appendix 3 may remain good faith estimates of the development
effort to be done by both parties and the costs related thereto, the parties
will enter into good faith discussions concerning the appropriate revisions to
such Appendix and will make such revisions to which both parties agree.
3.5 Each party shall appoint a representative by notice in writing to the
other party upon signature of this Agreement. Such representatives shall act as
the contact point for each party for the transmission of information, documents
and materials between the parties. Such representatives shall participate in
periodic conference calls or meetings to review the progress of the Work Plan,
adherence to the Development Cost Estimate and status of the Program. These
updates should be held on an "as needed" basis in the spirit of collaboration,
but at least every sixty (60) days. Each party's representative may appoint
additional individuals to deal with specific matters relating to the Program
and each party may change its representative by not less than seven (7) days
prior written notice to the other party.
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3.6 Subject to the terms of this Agreement and in particular to Articles 8
and 10 below, the parties shall share with each other all Program Information
generated under the Work Plan.
3.7 Each party shall use its reasonable efforts to ensure that the Work Plan
is performed in accordance with appropriate regulations issued by the FDA or
MCA, and cGLP.
ARTICLE 4
DEVELOPMENT COSTS AND PAYMENTS
4.1 Upon signing this Agreement, Medeva will pay Vaxcel ninety thousand
United States dollars (US$90,000).
4.2 If an IND or CTX for the Product has not been submitted to any one (1)
regulatory agency within one (1) year from the Effective Date, Medeva will pay
Vaxcel two hundred fifty thousand United States dollars (US$250,000), unless
the delay in filing the IND or CTX is caused by Vaxcel, in which case the
period for filing shall be extended to take account of such delay.
4.3 Medeva will pay Vaxcel one hundred sixty thousand United States dollars
(US$160,000) when an IND or CTX for the Product is submitted to any one (1)
regulatory agency. If Medeva paid the penalty for delay under Section 4.2 above
and the IND or CTX is submitted within three (3) months of the payment made
under Section 4.2, no additional moneys will be due to Vaxcel by Medeva for
this IND or CTX submission. If Medeva paid the penalty for delay under Section
4.2 above and the IND or CTX is submitted in a time period greater than three
(3) months of the payment made under Section 4.2 above, then Medeva will pay
Vaxcel the full one hundred sixty thousand United States dollar (US$160,000)
payment.
4.4 Medeva will pay Vaxcel two hundred fifty thousand United States dollars
(US$250,000) when the Phase I human clinical trials as referred to in the Work
Plan have been successfully completed. From a performance standpoint,
successful completion of Phase I trials is defined as the Product generating an
antibody response substantially greater than the Antigen alone as measured by
geometric mean titers and also having a safety profile sufficient to allow
continuation to Phase II human clinical trials. From a timing standpoint, Phase
I trials shall be considered complete ninety (90) days after the last patient
in the trials is vaccinated with the Product. This payment by Medeva to Vaxcel
is due regardless of whether Medeva exercises the Development Option (as
defined in Section 5.1).
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4.5 Medeva will reimburse Vaxcel for all expenses incurred by Vaxcel with
Medeva's prior written consent in performing the Work Plan. Vaxcel will provide
Medeva with cost estimates, quotes, invoices, or other documents which verify
Vaxcel's out-of-pocket expenses.
4.6 Medeva will be responsible for all of its direct and indirect costs
and expenses in performing the Work Plan.
ARTICLE 5
OPTION FOR DEVELOPMENT
5.1 Vaxcel hereby grants Medeva the option to secure a license to further
develop, manufacture, use, distribute and sell the Product in the Field upon
the completion of the Program (the "Development Option") subject to the terms
of Article 6. Medeva will, in its sole judgment, determine whether to exercise
the Development Option.
5.2 To exercise the Development Option, Medeva must give Vaxcel written
notice of exercise within forty-five (45) days after the Program Completion
Date.
ARTICLE 6
LICENSE AND SUPPLY AGREEMENT
6.1 If Medeva exercises the Development Option, the parties will enter
into good faith negotiations for definitive license and supply agreements
covering further development, regulatory approval, manufacture, use,
distribution and sale of the Product. From the date of Medeva's exercise of the
Development Option, the parties shall have ninety (90) days to conclude
definitive licensing and supply agreements. If at the end of such ninety (90)
day period (or such longer as the parties may agree) the definitive license and
supply agreements have not been concluded, neither party shall be obligated to
continue to negotiate the terms of nor enter into such definitive license and
supply agreement. Such agreements shall be co-exclusive (within the meaning of
Article 7), worldwide agreements.
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6.2 The following are the financial terms which will be included in
license and supply agreements entered into by the parties:
6.2.1 If the parties successfully negotiate and complete definitive
license and supply agreements, Medeva shall pay Vaxcel three hundred
thousand U.S. dollars (US$300,000), which must accompany the signed
agreements.
6.2.2 Medeva will be responsible for all further development
activities and costs associated with the Product, including, but not
limited to, human clinical testing, laboratory testing, pursuing
regulatory approval, final Product manufacturing, distribution, and
marketing.
6.2.3 Vaxcel will provide reasonable technical support to Medeva
during further development of the Product as requested by Medeva. For
any such work performed by Vaxcel, Medeva will pay Vaxcel for any and
all reasonable and agreed expenses associated with this effort.
6.2.4 Medeva will pay Vaxcel two hundred fifty thousand U.S. dollars
(US$250,000) when Phase II human trials have been successfully
completed. From a performance standpoint, successful completion of
Phase II trials is defined as the Product having the necessary safety
and efficacy profile to proceed to Phase III human trials. From a
timing standpoint, Phase II trials shall be considered complete ninety
(90) days after the last patient in the trials is vaccinated with the
Product.
If the Phase II trials have not been initiated within six (6) months
from the date that the license agreement is signed by both parties,
Medeva will pay Vaxcel thirty thousand U.S. dollars (US$30,000) per
month, unless delays in starting the Phase II trials are caused by
Vaxcel or regulatory authorities, in which case the period for filing
shall be extended to take account of such delay. These monthly
payments will continue until the Phase II trials are actually
initiated. Initiation of Phase II trials is defined as the date the
first patient is recruited in the trials.
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Under this Section 6.2.4, Phase II trials are defined as the challenge
studies in volunteers or some similar human trials as mutually determined
by the parties.
6.2.5 Medeva will pay Vaxcel three hundred thousand U.S. dollars
(US$300,000) when Phase III human trials have been successfully
completed. From a performance standpoint, successful completion of Phase
III trials is defined as the Product having the necessary safety and
efficacy profile to submit a Product License Application / New Drug
Application. From a timing standpoint, Phase III trials shall be
considered complete ninety (90) days after the last patient in the trials
is vaccinated with the Product.
If the Phase III trials have not been initiated within six (6) months
from the completion of the Phase II trials, Medeva will pay Vaxcel fifty
thousand U.S. dollars (US$50,000) per month, unless delays in starting
the Phase III trials are caused by Vaxcel, regulatory authorities, or
significant changes in the Phase III protocols not caused by Medeva, in
which case the period for filing shall be extended to take account of
such delay. These monthly payments will continue until the Phase III
trials are actually initiated. Initiation of Phase III trials is defined
as the date the first patient is recruited in the trials.
Under this Section 6.2.5, completion of Phase II trials is defined as
ninety (90) days after the last patient in the trials is vaccinated with
the Product. Phase III trials are defined as the pivotal protection
studies in the elderly or some similar human trials as mutually
determined by the parties.
6.2.6 Medeva shall pay Vaxcel three hundred thousand U.S. dollars
(US$300,000) when a Product License Application / New Drug Application is
submitted to the FDA and three hundred thousand U.S. dollars (US$300,000)
when a Product License Application / New Drug Application is submitted to
the MCA.
6.2.7 Medeva will pay to Vaxcel one million five hundred thousand U.S.
dollars (US$1,500,000) upon regulatory approval for commercialization of
the Product in the United States.
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6.2.8 Medeva will pay to Vaxcel one million one hundred fifty thousand
U.S. dollars (US$1,150,000) upon regulatory approval for
commercialization of the Product in the United Kingdom.
6.2.9 Medeva will pay to Vaxcel one hundred thousand U.S dollars
(US$100,000), per country, for regulatory approvals for
commercialization of the Product in countries other than the United
States and the United Kingdom. The limit on these regulatory approval
payments will be one million two hundred thousand U.S. dollars
(US$1,200,000) in total.
6.2.10 Vaxcel will cause Copolymer to be manufactured and supplied to
Medeva according to agreed specifications which are consistent with
appropriate regulatory approvals and under GMP conditions and Medeva
will be responsible for all final manufacturing of the Product
including formulating, bulk manufacturing, sterile filling, regulatory
approval, packaging and any other activities necessary for sale and
distribution. Vaxcel shall provide reasonable comfort to Medeva in
respect of the security and continuity of supply of the Copolymer.
6.2.11 In the event of CytRx being unable or unwilling to supply the
Copolymer to meet the requirements of the license and supply
agreements, Vaxcel shall procure that CytRx shall transfer to Vaxcel
or another party selected by CytRx the appropriate information and
knowledge to enable Vaxcel to have manufactured the Copolymer itself
to meet such requirements.
6.2.12 The costs for Vaxcel to supply Medeva with Copolymer CRL-1005
under the license and supply agreement will not exceed $20.00 per gram
in 1995 US dollars. In the event that a different Copolymer is used
pursuant to Section 2.2 (iii) above, this $20.00 per gram supply price
may need to be revised to reflect a higher cost of manufacturing.
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6.2.13 Medeva will pay Vaxcel a royalty rate of between 6% and 10% of
net sales, depending on the efficacy profile and production benefits
of the Product. The general guidelines that will determine these
royalty rates are: (i) the royalty rate to Vaxcel shall be 6% if the
Optivax System moderately improves the efficacy of the Antigen; (ii)
the royalty rate to Vaxcel shall be 8% if the Optivax System
significantly improves the efficacy of the Antigen; (iii) the royalty
rate to Vaxcel shall be 8% if the Optivax System moderately improves
the efficacy of the Antigen and reduces the amount of influenza virus
per recommended human dose; (iv) the royalty rate to Vaxcel shall be
10% if the Optivax System significantly improves the efficacy of the
Antigen and reduces the amount of influenza virus per recommended
human dose.
6.3 The license and supply agreement shall contain such other terms as the
parties consider appropriate and agree. The license and supply agreement shall
not become binding unless and until a document containing terms acceptable to
both parties is approved and executed by both of them.
ARTICLE 7
CO-EXCLUSIVITY
7.1 Save for as indicated in Section 7.2, Vaxcel shall not grant and shall
procure that CytRx shall not grant to any other person any rights over or in
respect of the Copolymer (or any other copolymer owned by or available to CytRx
or Vaxcel) and/or the Optivax System to any third party for use in the Field.
7.2 Vaxcel may grant to one other company ("Co-Developer") a license to
use the Copolymer and/or Optivax System in the Field ("Co-Exclusive License").
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7.3 If a license is granted to a Co-Developer pursuant to Section 7.2,
Vaxcel shall ensure that such license contains a royalty rate and supply price
which, in overall terms, are no more favorable to the Co-Developer than the
terms of any license and supply agreement entered into pursuant to Article 6
are to Medeva, unless such more favorable position, with respect to royalty
rate, is reasonably justified by the efficacy profile/production benefits of
the Co-Developer's product according to Section 6.2.13 or, with respect to
supply price, is reasonably justified by volume purchasing obligations. For the
purposes of verifying the observance of the provisions in this Section, Medeva
shall be entitled to have such license assessed by an independent expert who is
a partner of a "Big 6" accounting firm that does not serve as the auditor of
Medeva, Vaxcel or the Co-Developer and experienced in the matter at issue
nominated by Medeva and acceptable to Vaxcel , such acceptance not to be
unreasonably withheld, who shall report purely on whether in his/her view the
such terms are more favorable to such Co-Developer. If such independent expert
finds that such terms are more favorable to such Co-Developer, he/she shall
notify Vaxcel and Medeva of the amendments to be made to the terms of Article 6
and/or the license and supply agreements with Medeva to rectify the position
and such amendments shall be deemed to have taken effect from the effective
date of the license and supply agreements with Medeva or the effective date of
the license to the Co-Developer, whichever is later. The decision of such
independent expert shall be binding upon the parties and he/she shall act as an
expert and not as an arbitrator. The cost of such independent expert shall be
borne by Medeva if such expert considers such terms not to be more favorable to
the Co-Developer and by Vaxcel if he/she considers them to be more favorable.
Reciprocally, Medeva will allow Vaxcel to submit any license and supply
agreement entered into pursuant to Article 6 to a similar verification
procedure for the benefit of the Co-Developer.
For purposes of clarification, the analysis of the Co-Developer's or
Medeva's license by such independent expert shall not include upfront payments,
performance milestone payments, or other terms that do not constitute a royalty
rate or supply price.
7.4 Vaxcel hereby covenants and has procured a written covenant from CytRx
per Appendix 4 that: (i) no rights have been or will be granted directly or
indirectly by either of them to more than one other third party in relation to
the use of the Copolymer (or any other copolymer owned by or available to CytRx
or Vaxcel) and/or Optivax System in the Field for so long as this Agreement is
in being and during the term of any license and supply
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agreement entered into pursuant to Article 6; (ii) the provisions of Section
14.5 are true, accurate, and not misleading; (iii) if for any reason the
License Agreement is terminated in a manner that adversely affects Vaxcel's
ability to perform this Agreement or the license and supply agreement, then all
rights and licenses granted to Medeva hereunder and under any license and
supply agreement entered into pursuant to Article 6 to the extent consistent
with Section 6.2 of the Agreement and any other terms consented to in writing
by CytRx will be granted to Medeva directly by CytRx on the same terms and
conditions as are set out in this Agreement and any such license and supply
agreement.
ARTICLE 8
CONFIDENTIALITY
8.1 Each party (the "Receiving Party") receiving Confidential Information
(defined below) from the other party (the "Disclosing Party") agrees:
8.1.1 not to directly or indirectly disclose, communicate, or in any
way divulge to any person/organization outside of its organization,
any Confidential Information (as defined below) without the written
consent of the Disclosing Party.
8.1.2 to disclose Confidential Information received under this
Agreement only to persons within its organization, (or with prior
written consent of the other party to approved sub-contractors) who
have a need to know such Confidential Information and who are bound by
a written agreement to protect the confidentiality of such
Confidential Information.
8.1.3 to use and to procure that those persons and sub-contractors
referred to in 8.1.2 above use such Confidential Information only as
necessary to perform this Agreement including the Work Plan and for no
other purpose.
For the purposes of this Section 8.1, a party's organization shall include its
Affiliates.
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8.2 The above obligations shall not apply with respect to any Confidential
Information to the extent it can be demonstrated by the Receiving Party by
clear and convincing evidence that such Confidential Information:
8.2.1 was known to the Receiving Party prior to the date of
disclosure;
8.2.2 was lawfully disclosed to the Receiving Party by an independent,
unaffiliated third party, rightfully in possession of the Confidential
Information and with no confidentiality obligations to the Disclosing
Party;
8.2.3 becomes published or generally known to the public through no
fault or omission of the Receiving Party; or
8.2.4 is required to be disclosed to comply with applicable laws or
government regulations, provided that prior written notice of such
disclosure is given to the Disclosing Party to allow the Disclosing
Party to take actions to avoid and/or minimize the degree of such
disclosure.
8.3 "Confidential Information" shall mean: (i) in the case of Medeva or
its Affiliates, Technical Information concerning the Antigen (or the use or
manufacture thereof) owned by or licensed to Medeva; (ii) in the case of Vaxcel
or its Affiliates, Technical Information concerning the Copolymer or Optivax
System (or the use or manufacture thereof) owned by or sublicensed to Vaxcel;
and (iii) as to each party, Program Information owned by such party
(independently or jointly) in accordance with the provisions of Article 10
below and all information, whether or not in writing, of a private, secret, or
confidential nature concerning such party's business, business relationships,
financial affairs, or technology, including analyses, compilations, forecasts,
studies, or other documents. By way of illustration, but not limitation,
Confidential Information may include unpublished patent applications,
formulations, know-how, manufacturing processes, inventions, products,
processes, methods, techniques, formulas, compositions, compounds, research or
clinical data, development plans, customers and supplier lists.
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8.4 Nothing herein shall in any way reduce the rights of any party under
applicable laws concerning the protection of trade secrets and other
proprietary information.
8.5 The provisions of this Article 8 shall continue for ten (10) years
following the termination or expiry of this Agreement or, if later, the
termination or expiry of any license and supply agreement.
8.6 In so far as either party wishes to make an announcement regarding the
work to be carried out pursuant to this Agreement and/or the results thereof,
it shall notify the other in writing of the information which it wishes to
disclose and shall not disclose the same if such information amounts to
Confidential Information without the prior written consent of the other party.
Such consent shall not be unreasonably withheld. In its considerations
regarding the question of whether to give consent, the parties acknowledge that
they each have a requirement to keep their shareholders and investors informed
and will negotiate to minimize any inconsistency or discrepancy between the
information which is made available. Not withstanding the above, each party and
CytRx shall have the right to make such disclosures as are required by law.
8.7 Notwithstanding anything herein to the contrary, either party may
disclose (by presentation, publication, or otherwise) the existence of this
Agreement, and the methodology and results of the Phase I human clinical trials
of the Product. Each party shall give the other copies of any proposed
publication or presentation at least thirty (30) days before submission of any
proposed presentation or publication. At the reviewing parties request,
inaccuracies will be corrected and Confidential Information (other than
methodology and results of the Phase I human clinical trials of the Product) of
the reviewing party will be deleted.
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ARTICLE 9
TERMINATION
9.1 This Agreement shall begin on the Effective Date and, unless
terminated under this Article 9, shall remain in effect until:
(i) such time as the Development Option pursuant to Article 5 has not
been exercised and is no longer capable of being exercised; or, if
such option is exercised;
(ii) until the definitive license and supply agreements referred to in
Article 6 have been entered into or, if earlier, are no longer capable
of being entered into; or
(iii) the second anniversary of the Effective Date if earlier than
(i) and (ii) above.
9.2 Notwithstanding any other provisions of this Agreement, Medeva may
cease performing the Work Plan and terminate this Agreement:
9.2.1 at any time, if the preclinical or Phase I human clinical
results of the Product are in Medeva's opinion unfavorable; or
9.2.2 upon thirty (30) days notice to Vaxcel if Vaxcel does not
proceed diligently with the Program, and Vaxcel has not corrected its
performance within thirty (30) days after Medeva's notification of the
specific problems with Vaxcel's performance.
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9.3 Vaxcel may terminate Medeva's rights hereunder:
9.3.1 upon thirty (30) days notice to Medeva if Medeva does not
proceed diligently with the Program, and Medeva has not corrected its
performance within thirty (30) days after Vaxcel's notification of the
specific problems with Medeva's performance; or
9.3.2 if Medeva has failed to pay Vaxcel any amount payable to Vaxcel
hereunder, and such failure is continuing for thirty (30) days after
Vaxcel notifies Medeva of such nonpayment.
9.4 If this Agreement is terminated under this Article 9, all unused
Antigen, Copolymer and Optivax System shall be returned to their rightful owner
or destroyed, at the sole option of the rightful owner, within ten (10) days of
termination. In addition, any inventories of Product, including clinical
supplies, shall be destroyed. All disposals of materials shall be performed in
compliance with applicable law.
9.5 For the avoidance of doubt from the date of termination pursuant to
this Article 9, no further payments shall be due from Medeva to Vaxcel pursuant
to Article 4, but any payments due at the date of such termination shall remain
due and payable.
ARTICLE 10
OWNERSHIP
10.1 Improvements and Program Information to the extent that they do not
relate either: (i) exclusively to the Antigen or other constituents of the
Product (save for the Copolymer and the Optivax System), on one hand, or (ii)
exclusively to the Copolymer or Optivax System, on the other hand, shall be
jointly owned by the parties ("Jointly Owned Improvements and Program
Information"). In all other cases, Improvements and Program Information shall
be: (i) the exclusive property of Medeva if and to the extent it relates to the
Antigen itself or any other constituent of the Product other than the Copolymer
and/or Optivax System; and (ii) the exclusive property of Vaxcel if and to the
extent it relates to the Copolymer and/or Optivax System itself.
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10.2 If Jointly Owned Improvements and Program Information arise which are
jointly owned pursuant to Section 10.1 above, the parties will enter into good
faith negotiations to determine an appropriate course of action. Failing
agreement over such course of action, neither party shall be entitled to use or
authorize others to use such Jointly Owned Improvements and Program
Information.
10.3 Nothing in this Agreement shall be construed to constitute a grant by
Medeva of any rights related to the Antigen, nor a grant by Vaxcel of any of
its rights related to the Copolymer and/or Optivax System other than to perform
this Agreement including the Work Plan.
10.4 For the purposes of this Article 10, "Improvements" shall mean any
and/or new or useful processes, manufacturing methods, formulations or
compositions first conceived, discovered or developed in the course of carrying
out the Program.
10.5 If this Agreement terminates for any reason other than pursuant to
Section 9.2.2, Vaxcel will own all Jointly Owned Improvements and Program
Information referred to in Section 10.1 and Medeva will transfer to Vaxcel all
such Jointly Owned Improvements and Program Information in its possession, and
Vaxcel will be free to use or share such Jointly Owned Improvements and Program
Information with others for licensing or other purposes, at which time Article
8, Confidentiality, shall cease to apply to Vaxcel in relation to such Jointly
Owned Improvements and Program Information.
10.6 If this Agreement terminates pursuant to Section 9.2.2, Medeva will
own all Jointly Owned Improvements and Program Information referred to in
Section 10.1 and Vaxcel will transfer to Medeva all such Jointly Owned
Improvements and Program Information in its possession, and Medeva will be free
to use or share such Jointly Owned Improvements and Program Information with
others for licensing or other purposes, at which time Article 8,
Confidentiality, will cease to apply to Medeva in relation to such Jointly
Owned Improvements and Program Information.
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10.7 For the avoidance of doubt, the provisions of Sections 10.5 and 10.6
above shall not apply to Improvements and Program Information owned exclusively
by Medeva or Vaxcel pursuant to Section 10.1 above, which at all times shall
remain the property of Medeva or Vaxcel as appropriate, nor Technical
Information which is not Program Information, which shall remain at all times
the property of the party making such Technical Information available for use
in the Program.
ARTICLE 11
INDEMNITY
11.1 Medeva will indemnify Vaxcel and its Affiliates (if any), and the
employees, officers, directors, and agents of Vaxcel and its Affiliates (if
any), ("VAXCEL") from any and all liability, loss, damages, costs, or expenses
(including reasonable attorneys' fees) relating to legal liability to third
parties for death or personal injury which VAXCEL may incur, suffer, or be
required to pay resulting from or arising from this Agreement (including Phase
I human clinical trial), unless such liability is due solely to VAXCEL's or
CytRx's negligence or willful misconduct.
11.2 Vaxcel shall indemnify Medeva and its Affiliates and the employees,
officers, directors, and agents of Medeva and its Affiliates ('MEDEVA") from
any and all liability, loss, damages, costs, or expenses (including reasonable
attorneys' fees) relating to legal liability to third parties for death or
personal injury which MEDEVA may incur, suffer, or be required to pay resulting
from or arising from this Agreement, to the extent the same are due solely to
the negligence or willful misconduct of Vaxcel or CytRx or any of their agents
or employees.
ARTICLE 12
MISCELLANEOUS
12.1 All payments to Vaxcel under this Agreement shall be made in legal
currency of the United States. The initial ninety thousand dollar ($90,000)
payment to Vaxcel will be made by check upon Medeva's signing this Agreement.
All subsequent payments made by Medeva under this Agreement shall be made by
wire transfer and shall be delivered to Vaxcel at the account designated in
writing by Vaxcel from time to time.
Page 20
<PAGE> 21
12.2 This Agreement shall be deemed to have been entered into and shall be
construed and enforced in accordance with the laws of England.
12.3 This Agreement, together with the Appendices hereto, sets forth and
constitutes the entire agreement between the parties with respect to the
subject matters and supersedes any and all prior agreements, understandings,
promises, and representations made by either party to the other concerning the
subject matter hereof and the terms applicable hereto. This Agreement may not
be released, discharged, amended, or modified in any manner except by an
instrument in writing signed by duly authorized representatives of Vaxcel and
Medeva.
12.4 In making and performing this Agreement, the parties act and shall act
at all times as independent entities and nothing contained in this Agreement
shall be construed or implied to create an agency, partnership, or employer and
employee relationship between Vaxcel and Medeva. Except as specifically
provided herein, at no time shall either party make commitments or incur any
charges or expenses for or in the name of the other party.
12.5 Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement.
12.6 Any notice or other communication required or permitted to be made or
given to either party hereto pursuant to this Agreement shall be in writing,
shall be delivered by hand delivery, courier, registered or certified air mail
(return receipt requested) or faxed, and shall be addressed as follows or to
another address of which one party has given the other party notice with the
provisions of this clause:
If to Vaxcel: If to Medeva:
Vaxcel, Inc. Medeva PLC
154 Technology Parkway Evans House, Regent Park
Technology Park/Atlanta Kingston Road
Norcross, Georgia 30092 Leatherhead Surrey KT22 7PQ
Attention: Mr. Paul Wilson Attention: Dr. Peter Cozens
Fax No. (770) 453-0194 Fax No. 044 1 372 364115
Page 21
<PAGE> 22
All notices given in accordance with this Section 12.6 shall be deemed to be
effective at the time of delivery or transmission to the addressee in the case
of hand delivery or fax, or seven (7) business days after being sent by
registered or certified air mail (return receipt requested) to the addressee.
12.7 Each party shall provide the other party with the opportunity
to approve any press release or similar public announcement concerning this
Agreement as soon as practical, but in no event later than forty-eight (48)
hours before the announcement is made. Any announcement or press release to be
made on or immediately after signing this Agreement shall be in an agreed form.
12.8 Neither this Agreement nor a party's rights and obligations hereunder
shall be assignable by either party without the prior written consent of the
other party, except that such consent is not required in connection with the
assignment of either party's rights or obligations hereunder to an Affiliate
thereof for so long as they remain an Affiliate or to any successor to
substantially all of the party's business. Subject to the foregoing, this
Agreement, and each and every provision hereof, shall be binding upon and shall
inure to the benefit of the parties, their respective successors,
successors-in-title, heirs and assigns, and each and every
successor-in-interest to any party, whether such successor acquires such
interest by way of gift, purchase, foreclosure, or by any other method, shall
hold such interest subject to all the terms and provisions of this Agreement.
Medeva shall be entitled to delegate its rights and the performance of its
obligations under this Agreement to Affiliates without the consent of Vaxcel.
12.9 The provisions of the following Articles and Sections of this
Agreement shall remain in force notwithstanding its termination for any reason;
Article 1, Article 8, Article 10, Article 11, Sections 12.2, 12.3,
12.6, 14.6 and Article 15.
Page 22
<PAGE> 23
ARTICLE 13
FORCE MAJEURE
The parties shall not be responsible for failure to perform any of the
obligations imposed by this Agreement, provided such failure shall be
occasioned by fire, flood, explosion, lightening, windstorm, earthquake,
subsidence, destruction in whole or part of machinery or equipment or
discontinuity in the supply of power, government interferences, civil
commotion, riot, war, strikes, or any similar causes beyond the reasonable
control of the parties.
ARTICLE 14
WARRANTIES
14.1 Each party hereto represents and warrants that the statements in the
Recitals and the information in Appendix 1 relating to it (and in the case of
Vaxcel, to CytRx and the CytRx patents and other Rights) are true and accurate
at the date of this Agreement.
14.2 Vaxcel represents and warrants that: (i) it has the full right and
authority to enter into and comply with the terms of this Agreement, (ii) it
has not granted to any third party any rights which are inconsistent with the
rights granted to Medeva pursuant to this Agreement or which alter or purport
to alter the relationship between Vaxcel and Medeva contemplated by this
Agreement.
14.3 (i) Vaxcel represents that, to its knowledge and belief, utilizing for
the purposes of this Agreement (including the Program and Work Plan)
the Rights, the Copolymer, Optivax System and Technical
Information, relating thereto, Medeva and its Affiliates will not
infringe any intellectual property rights of any third party other
than Medeva or its Affiliates. Medeva's and its Affiliates' sole
remedy with respect to allegations or proof of infringement of
third-party intellectual property rights by the Rights, Copolymer,
Optivax System or Technical Information relating thereto or their use
by Medeva or its Affiliates, to the exclusion of all other remedies
therefore, will be for Medeva and its Affiliates to invoke the
provisions of this Section 14.3.
Page 23
<PAGE> 24
(ii) Vaxcel, at its own expense and subject to the terms and
conditions hereof, will defend claims brought against Medeva
(and/or its Affiliates) in the United States and the United
Kingdom by third parties (other than Affiliates of Medeva)
that use of the Rights, Copolymer, Optivax System or Technical
Information related thereto in accordance with this Agreement
constitutes infringement of an intellectual property right
under the laws of the United States or the United Kingdom.
Vaxcel shall have no obligation to defend Medeva or any of its
Affiliates against, or to pay any judgment resulting from, any
claim that use of the Rights, Copolymer, Optivax System, or
the Technical Information in combination with anything else
infringes any other person's intellectual property rights,
unless such use of the Rights, Copolymer, Optivax System, or
the Technical Information is shown to be infringing when not
in combination or conjunction with anything else, in which
case, Vaxcel shall defend Medeva and its Affiliates in
accordance with this Section 14.3 (ii).
(iii) To be entitled to defense by Vaxcel against a
third-party infringement claim:
(a) Medeva shall advise Vaxcel of the existence of
the claim promptly upon learning of the assertion of
the claim (whether or not litigation or other
proceeding has been filed or served);
(b) Medeva shall permit Vaxcel to have the sole right
to control the defense and/or settlement of all such
claims, in litigation or otherwise; provided,
however, that if Medeva is named as a party in a
lawsuit and Vaxcel is unable to demonstrate to
Medeva's reasonable satisfaction that it will be able
to satisfy any award reasonably likely to be made
against Medeva in such a lawsuit and provide Medeva
with an indemnity or other security acceptable to
Medeva in respect thereof, then Medeva may undertake
its own defense, at its own cost, and Vaxcel shall
not have any obligations under Section 14.3 (viii).
Page 24
<PAGE> 25
(iv) Medeva shall be entitled to be kept fully informed of all steps
taken in the course of the defense and/or settlement of all such
claims in litigation or otherwise and Vaxcel shall not enter into any
binding settlement of the same without Medeva's prior consent, unless
such settlement grants a full release to Medeva.
(v)Vaxcel shall consider reasonable comments and considerations
suggested by Medeva in connection with the defense of any
indemnification claim.
(vi) If a third-party infringement claim, of which Vaxcel was notified
in accordance with this Section 14.3 is sustained in a judgment,
includes an injunction prohibiting Medeva from continued use of the
Rights, Copolymer, Optivax System, or Technical Information related
thereto, then Vaxcel shall, in its sole election and at its expense:
(a) procure for Medeva the right to continue to use such
materials pursuant to this Agreement; or
(b) replace or modify such materials to make them
noninfringing; or
(c) direct Medeva to cease use of such materials or of the
specific functions of such materials that resulted in the
judgment.
(vii) (a) If Vaxcel elects to direct Medeva in accordance with the
provisions of sub-paragraph 14.3 (vi) (c) above, no further
payments shall be due to Vaxcel hereunder.
(b) In the event that Vaxcel elects to take the option
referred to in sub-paragraph 14.3 (vi) (b) above, it shall
compensate Medeva in full for any additional work and expenses
involved in repeating or carrying out fresh clinical trials
or other development work which Medeva will carry out with
noninfringing materials.
Page 25
<PAGE> 26
(c) In the event that any injunction as referred to above is
granted, then Medeva shall not be obligated to make any
payments under the terms of this Agreement until and unless
(i) Vaxcel shall have procured the rights for Medeva referred
to in sub-paragraphs 14 (vi) (a) or (b) above, or, (ii)
notwithstanding such injunction, Medeva is entitled to and/or
does continue to use such materials in accordance with
direction by Vaxcel provided under sub-paragraph 14.3 (vi) (c)
without breach of the third party rights to which such
injunction relates or the injunction itself.
(viii) Vaxcel will pay or otherwise satisfy any monetary award made
against Medeva as part of a third-party infringement claim of which
Vaxcel was notified in accordance with this Section 14.3.
14.4 Each party warrants to the best of its knowledge and belief that all
Technical Information provided by it hereunder will be accurate and complete.
14.5 Vaxcel hereby warrants that: (i) CytRx is the owner of record of,
and owns all right, title, and interest in and to the patent and patent
applications described in Part I of Appendix 1 to the Agreement (the
"Patents"); (ii) CytRx has granted Vaxcel an exclusive, worldwide license to
rights under the Patents sufficient to allow Vaxcel to grant to Medeva the
rights specified in Section 2.1 and the license and supply agreement described
in Article 6 of the Agreement ("License and Supply Agreement"); (iii) although
CytRx does not currently manufacture commercial quantities of the Copolymer, it
is not aware of any reason why the Copolymer could not be manufactured in
commercial quantities nor why CytRx itself or through a third party contract
manufacturer would not be in a position to meet forecasts and orders for
Copolymer in amounts and time periods which are reasonable in the context of
other pharmaceutical products of this nature; (iv) neither the grant by CytRx
of the exclusive license rights to Vaxcel nor the arrangements for supply of
Copolymer to Vaxcel as currently agreed or as will be agreed by CytRx to
satisfy the requirements of the License and Supply Agreement do or will violate
or conflict with any rights to the Patents granted by CytRx to any other
person; and (v) the contents of the first four recitals on the first page of
the Agreement and Appendices 1 and 2 are true and accurate.
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<PAGE> 27
14.6 (i) In the event of a material breach of warranty by Vaxcel hereunder,
Medeva shall be entitled to terminate this Agreement and recover from Vaxcel
all amounts paid to Vaxcel pursuant to this Agreement and be released from any
obligations to pay amounts due but not yet paid as its sole and exclusive
remedy.
(ii) In the event of a material breach of warranty by Medeva
hereunder, Vaxcel shall be entitled to terminate this Agreement and claim
damages for breach from Medeva without limiting and in addition to any other
rights which Vaxcel may have arising from such breach of warranty.
14.7 Except as set forth in this Agreement, each party hereby disclaims any
and all representations and warranties with respect to the subject matter of
this Agreement, and any products or services provided hereunder, express or
implied, including, without limitation warranties of title, noninfringement,
merchantibility and fitness for a particular purpose or use (whether or not
such party knows, has reason to know or has been advised of such purpose or
use).
ARTICLE 15
Neither party will be liable to the other for any consequential, punitive, or
exemplary damages of any kind.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
VAXCEL, INC. MEDEVA Europe Limited
By /s/ Paul J. Wilson By /s/
-------------------------- ------------------------
Title President & CEO Title Director
----------------------- ---------------------
Page 27
<PAGE> 28
APPENDIX 1
PART I
CYTRX PATENTS
<TABLE>
<CAPTION>
U.S. FILING U.S. SERIAL CURRENT
TITLE DATE NUMBER STATUS
- ----- ---- ------ ------
<S> <C> <C> <C>
Nonionic Block Copolymers August 9, 1994 08/292,814 Pending
</TABLE>
Summary
This patent application is directed to copolymers with a high molecular weight
and includes the Copolymer designated in this Agreement as CRL-1005. The
application contains claims for: (i) composition of matter; (2) use of these
copolymers as adjuvants/delivery systems with a wide variety of antigens; and
(3) the manufacturing process. When mixed with an antigen, the copolymers can
either be used alone in an aqueous solution or combined with other ingredients
(e.g., emulsions) in a final vaccine formulation.
This patent application was filed in the United States in August 1994 and was
filed under the Patent Cooperation Treaty (PTC) in August 1995. All countries
were designated.
PART II
OTHER RIGHTS AND TECHNOLOGY
During the term of this Agreement, Vaxcel will make available to Medeva a copy
of all necessary information on the Copolymer and Optivax System (including,
but not limited to, the toxicology study on the Copolymer alone, stability
data, know-how for formulating with the Antigen) needed by the parties to
perform the Work Plan. Vaxcel and CytRx will prepare and CytRx will submit a
Drug Master File on the Copolymer to the FDA and/or MCA and allow Medeva to
access this information for confidential regulatory purposes.
<PAGE> 29
APPENDIX 2
DESCRIPTION OF CRL-1005
CRL-1005 is a synthetic, linear, nonionic, triblock copolymer consisting of
polyoxypropylene (POP) and polyoxyethylene (POE). The material is synthesized
so that one central hydrophobic block of POP is positioned between two smaller
hydrophilic blocks of POE within each molecule. Thus, each molecule has an
amphipathic structure. CRL-1005 has an average molecular weight of
approximately 12,000 daltons. The POP block comprises about 95% of each
molecule of CRL-1005 and the two POE blocks represent about 5%.
<PAGE> 30
APPENDIX 3
WORK PLAN
PRELIMINARY SCHEDULE OF THE WORK PLAN AND DEVELOPMENT COSTS OF A MEDEVA
AND VAXCEL COLLABORATION ON AN ADJUVANTED INFLUENZA VIRUS VACCINE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
MEDEVA/VAXCEL WHEN
TASK MANPOWER LOCATION DURATION STARTED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Formulation of Product 2 Ph.D.s & 2 Speke, UK & 12 Months As Soon As
Analytical Work-up Technicians Atlanta, Ga. Deal Signed
SRO
Potency Split Between
Other Tests Medeva & Vaxcel
Stability
- -----------------------------------------------------------------------------------------------------------------------------------
Toxicology Studies (2) Contracted Out Where Most 6 Months As Soon As
2 Species Acute Cost Effective Product Defined
Rabbit Tolerance
Anaphylaxis (??)
- -----------------------------------------------------------------------------------------------------------------------------------
Animal Efficacy Studies 7 MSR Speke, UK 3 Months As Soon As
Ferret Protection Studies Product Defined
- -----------------------------------------------------------------------------------------------------------------------------------
CTX/IND Preparation 2+1 MSR MSR Leatherhead 6 Months As Soon As
UK To Approval Product Defined
- -----------------------------------------------------------------------------------------------------------------------------------
Phase I Human Study MSR/CRO UK 6 Months On CTX or IND
Proof of Principle Approval
In Elderly (less than 75)
Volunteers
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ESTIMATED ESTIMATED CUMULATIVE
TASK OUTPUT COST (POUND STERLING) COST (US$) TIME (1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Formulation of Product Part of 250,000 $400,000 12 Months
Analytical Work-up CTX/IND
SRO
Potency
Other Tests
Stability
- -----------------------------------------------------------------------------------------------------------------------------------
Toxicology Studies (2) Part of 100,000 $160,000 18 Months
2 Species Acute CTX/IND
Rabbit Tolerance
Anaphylaxis (??)
- -----------------------------------------------------------------------------------------------------------------------------------
Animal Efficacy Studies Part of 50,000 $ 80,000 18 Months
Ferret Protection Studies CTX/IND
- -----------------------------------------------------------------------------------------------------------------------------------
CTX/IND Preparation Allows Human 40,000 $ 64,000 18 Months
Studies
- -----------------------------------------------------------------------------------------------------------------------------------
Phase I Human Study Part of NDA/PLA 150,000 $240,000 24 Months
Proof of Principle Strategy for
In Elderly (less than 75) Timely Submission
Volunteers
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TASK COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Formulation of Product
Analytical Work-up
SRO
Potency
Other Tests
Stability
- -----------------------------------------------------------------------------------------------------------------------------------
Toxicology Studies (2)
2 Species Acute
Rabbit Tolerance
Anaphylaxis (??)
- -----------------------------------------------------------------------------------------------------------------------------------
Animal Efficacy Studies
Ferret Protection Studies
- -----------------------------------------------------------------------------------------------------------------------------------
CTX/IND Preparation
- -----------------------------------------------------------------------------------------------------------------------------------
Phase I Human Study Probably 50 Volunteers
Proof of Principle Receive Fluvirin & 50 Adflu;
In Elderly (less than 75) HAI & NT Used To Define An
Volunteers Improvement
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total Duration of Project; Some Studies Can Run Concurrently
(2) Exact Details Depend on How Much Tox There Is For The Copolymer (e.g. Do
We Need To Do Genotoxicity On Product/ Ames?)
Note: A US Dollar / UK Pound Conversion Rate of 1.60 Was Used
<PAGE> 31
[CytRx Corporation Letterhead]
APPENDIX 4 Jack Luchese
President
Chief Executive Officer
Medeva Europe Limited
Evans House, Regent Park
Kingston Road
Leatherhead Surrey KT22 7PQ
Attention: Dr. Peter Cozens, Head of Licensing
Dear Dr. Cozens:
In connection with Medeva's execution of the Vaxcel/Medeva Agreement dated
as of the date hereof, CytRx Corporation hereby represents and warrants that:
(i) CytRx is the owner of record of, and owns all right, title, and
interest in and to the patent and patent applications described in Part
I of Appendix 1 to the Agreement (the "Patents");
(ii) CytRx has granted Vaxcel an exclusive, worldwide license to
rights under the Patents sufficient to allow Vaxcel to grant to
Medeva the rights specified in Section 2.1 and the license and
supply agreement described in Article 6 of the Agreement ("License and
Supply Agreement");
(iii) although CytRx does not currently manufacture commercial
quantities of the Copolymer, it is not aware of any reason why the
Copolymer could not be manufactured in commercial quantities nor why
CytRx itself or through a third party contract manufacturer would not
be in a position to meet forecasts and orders for Copolymer in amounts
and time periods which are reasonable in the context of other
pharmaceutical products of this nature;
<PAGE> 32
(iv) neither the grant by CytRx of the exclusive license rights to
Vaxcel nor the arrangements for supply of Copolymer to Vaxcel as
currently agreed or as will be agreed by CytRx to satisfy the
requirements of the License and Supply Agreement do or will
violate or conflict with any rights to the Patents granted by CytRx
to any other person; and
(v) the contents of the first three recitals on the first page of the
Agreement and Part I of Appendix 1 and Appendix 2 are true and accurate.
CytRx covenants and agrees that:
(i) CytRx has not and will not directly or indirectly grant any
rights to any person other than Vaxcel in relation to the use of the
Patents, Copolymer (or any other copolymer owned by or available
to CytRx) and/or the Optivax System in the Field for so long as the
Agreement is in being and during the term of any License and Supply
Agreement entered into pursuant to Article 6 of the Agreement;
(ii) if for any reason the License Agreement granted by CytRx to
Vaxcel is terminated in a manner that adversely affects Vaxcel's
ability to perform the Agreement or the license and supply
agreement, then all rights and licenses granted to Medeva under the
Agreement and under any License and Supply Agreement entered into
pursuant to Article 6 to the extent consistent with Section 6.2 of the
Agreement and any other terms consented to in writing by CytRx will be
granted to Medeva directly by CytRx on the same terms and conditions
as are set out in the Agreement and any such License and Supply
agreements; and
(iii) prior to the entering into of the License and Supply
Agreement, CytRx will enter into binding arrangements with Vaxcel to
manufacture and supply to Vaxcel Copolymer which will enable Vaxcel to
perform such License and Supply Agreement in accordance with its the
terms set forth in Section 6.2.10 and other such terms as Vaxcel,
CytRx, and Medeva shall agree. In the event of CytRx being unwilling
or unable to do so, CytRx will transfer to Vaxcel or another party
selected by CytRx the appropriate information and knowledge to
enable Vaxcel to have manufactured the Copolymer itself to meet the
requirements of such License and Supply Agreements in accordance with
the provisions of 6.2.11 or, in the event of Vaxcel's default, to
transfer the same to Medeva to enable Medeva to manufacture or have
manufactured the Copolymer itself.
<PAGE> 33
This letter shall be governed by the laws of England and may not be amended
or assigned without the prior written consent of CytRx. CytRx shall not be
liable in money damages for any breach of the representations and warranties
or covenants in this letter, except to the extent of Vaxcel's liability for
such breach under Section 14.6(i) less any amount paid by Vaxcel.
Capitalized terms used without definition herein shall have the meanings
ascribed to those terms in the Agreement.
Signed by: /s/ JACK LUCHESE
----------------------------
Duly authorized for and on behalf of
CytRx Corporation
<PAGE> 1
EXHIBIT 10.15
SERVICES AND FACILITIES USE AGREEMENT
This SERVICES AND FACILITIES USE AGREEMENT (the "Agreement") is
executed as of October 10, 1996 ("Effective Date") by and between CYTRX,
CORPORATION, a Delaware corporation ("CytRx"), and VAXCEL, INC., a Delaware
corporation ("Vaxcel").
WITNESSETH:
WHEREAS, Vaxcel has obtained from CytRx and CytRx has provided to
Vaxcel certain administrative / technical services and office space under the
terms and conditions set forth in a Services and Facilities Agreement dated as
of June 1, 1993 (the "Original Agreement");
WHEREAS, Vaxcel desires to continue to occupy a portion of CytRx's
Norcross Georgia facility and CytRx desires to permit Vaxcel to utilize such
premises on the terms and conditions hereinafter set forth;
WHEREAS, Vaxcel wishes to continue to utilize CytRx and CytRx desires
to continue to provide to Vaxcel certain administrative and technical services
on the terms and conditions hereinafter set forth; and
WHEREAS, the parties wish to formally evidence their understandings and
arrangements with respect to the administrative / technical services and
facilities to be provided to Vaxcel by CytRx.
NOW THEREFORE, the parties hereto, in consideration of their mutual
covenants and intending to be legally bound, hereby agree as follows:
1. Services
1.1 CytRx agrees to provide (either directly or through subsidiaries of
CytRx) for the term specified herein the management, administrative, and other
services as may be reasonably requested by Vaxcel including, without limitation,
consultation in regard to general management, financial management, development
and implementation of marketing strategy, technical and production management
assistance, human resources management, insurance programs administration, audit
administration, tax research and planning, preparation of income tax returns,
and other administrative functions and advice in connection with the operations
of the business of Vaxcel. CytRx shall designate the appropriate persons to
perform the services under this Agreement and the portion of time such employees
shall spend providing such services.
<PAGE> 2
1.2 CytRx agrees to make available to Vaxcel the services of its
technical and scientific personnel for specific projects to be designated from
time to time by mutual agreement of CytRx and Vaxcel.
1.3 In consideration of the services to be rendered by CytRx under this
Section 1, Vaxcel shall pay CytRx: (i) a pro rata share of the salaries of the
management and administrative employees of CytRx who provide services to Vaxcel
hereunder plus an additional 45% of such amount to cover fringe benefits,
overhead, and other direct and indirect costs and expenses related to such
employees; and (ii) a pro rata share of the salaries of the technical,
laboratory, and research employees of CytRx who provide services to Vaxcel
hereunder plus 100% of such amount to cover fringe benefits, overhead (including
laboratory equipment associated with such personnel), and other direct and
indirect costs and expenses related to such employees. Vaxcel recognizes that
CytRx has heretofore provided, or has made arrangements for, certain services
and benefits for Vaxcel and that CytRx may continue to provide, or make
arrangements with third parties for, certain of such services and benefits. The
foregoing may involve, among other things, various types of insurance programs
and various legal, accounting, and other matters requiring outside professional
services. To the extent that CytRx continues to incur obligations for Vaxcel at
Vaxcel's request in connection with such services and benefits, Vaxcel shall pay
to CytRx the actual and identifiable costs of such services and benefits, or, in
those cases where actual costs cannot be identified, Vaxcel's proportionate
share of such benefits and services, and the sums necessary to discharge, repay,
or to otherwise compensate CytRx for any obligations incurred by CytRx in
connection therewith. CytRx shall submit to Vaxcel a monthly statement of all
such sums due in accordance with the provisions of this Section 1.3 and each
such statement shall be paid by Vaxcel within 15 days after the delivery of such
statement to Vaxcel. At the request of CytRx, Vaxcel shall from time to time
certify to Vaxcel such facts from CytRx's records as may be relevant to the
determination of the monthly services charge.
1.4 At the beginning of each calendar quarter, the parties shall review
and agree upon the level of services to be provided by CytRx to Vaxcel. If the
actual level of services is different than the anticipated level of services, an
adjustment will be made under Section 1.3 to take into account such change in
services. Nothing herein shall be construed to require CytRx to provide any
services under this Agreement which cannot reasonably be provided by CytRx's
staff or which adversely affects the conduct of CytRx's business.
2
<PAGE> 3
2. Administrative Facility Use
2.1 CytRx agrees to reserve and make available to Vaxcel certain
administrative space located at 154 Technology Parkway, Norcross, Georgia. CytRx
agrees to provide Vaxcel reasonable access to the facility and Vaxcel agrees to
comply with CytRx's standard operating procedures regarding access to the
facility.
2.2 Vaxcel is currently occupying approximately 800 square feet of
administrative space in the Norcross Georgia facility. Upon the mutual approval
of both parties, Vaxcel may occupy additional or less administrative space in
the facility. Vaxcel shall reimburse CytRx for such usage at the annualized rate
of $15.00 per square foot.
2.3 The fee paid by Vaxcel to CytRx for administrative space shall
include basic office furniture, utilities, taxes, depreciation, general
management and maintenance, basic phone service, and reasonable usage of copy
machines, office supplies, postage, conference rooms, and other common areas.
Out-of-pocket expenditures, such as long distance charges, Fedx's,
equipment, and large office supplies, shall be paid directly by Vaxcel. CytRx
shall submit to Vaxcel a monthly statement of all such sums due in accordance
with the provisions of this Section 2.3 and each such statement shall be paid by
Vaxcel within 15 days after the delivery of such statement to Vaxcel.
3. Term and Termination
3.1 The Agreement shall commence on the Effective Date and shall
continue in force unless terminated sooner by either party.
3.2 Upon default by either party in the performance of any of the
provisions hereof, the party not in default shall give the defaulting party
written notice specifying such default and the defaulting party shall have 30
days after receipt of such notice to remedy or correct the condition of default
specified therein. If at the end of such 30-day period, the defaulting party has
not remedied or corrected the default, the other party may immediately terminate
this Agreement upon written notice to the defaulting party.
3.2 The Agreement may be terminated by either party upon eight (8)
months written notice. The Agreement shall automatically be terminated in the
event of bankruptcy or insolvency of either party.
3
<PAGE> 4
4. Miscellaneous
4.1 For purposes of the Agreement and all services to be provided
hereunder, CytRx shall not be considered a partner, co-venturer, agent, employee
or representative of Vaxcel, but shall remain in all respects an independent
contractor. Neither party shall have any right or authority to make or undertake
any promise, warranty, or representation, to execute any contract, or otherwise
to assume any obligation or responsibility in the name of or on behalf of the
other party, except to the extent specifically authorized herein or in writing
by the other party.
4.2 CytRx shall have no liability for claims, liabilities, losses,
damages or expenses except such as are determined by final and nonappealable
judgment of a court of competent jurisdiction to result primarily from CytRx's
gross negligence or bad faith in providing a service hereunder. In such event,
Vaxcel's remedy shall be limited to a refund of the amounts paid to CytRx for
such service.
4.3 Vaxcel will indemnify and hold harmless CytRx, its affiliates and
the representative directors, officers, agents and employees of CytRx and its
affiliates from and against any claims, actions, proceedings, demands,
liabilities, damages, judgments, assessments, losses and costs arising out of or
in connection with the services rendered by CytRx under the Agreement. Vaxcel
will not, however, be responsible for any claims, liabilities, losses, damages
or expenses that are determined by final and nonappealable judgment of a court
of competent jurisdiction to result primarily from CytRx's gross negligence or
bad faith.
4.4 Nothing herein shall be construed to relieve the directors or
officers of Vaxcel from the performance of their respective duties or limit the
exercise of their powers in accordance with the Certificate of Incorporation or
By-Laws of Vaxcel, any applicable provisions of the Business Corporation Law of
the State of Delaware, or otherwise. The activities of Vaxcel shall at all times
be subject to the control and direction of its Board of Directors and Officers.
4.5 Any notice authorized or required to be given hereunder shall be
sufficiently and satisfactorily given if the same is in writing or confirmed in
writing and is delivered or mailed, first class, postage prepaid, addressed to
either party at its address specified from time to time.
4.6 The Agreement shall be governed by the laws of the State of
Delaware. No amendment or modification of the Agreement shall be effective
unless in writing and signed by the parties hereto. The Agreement shall not be
assignable by Vaxcel without the written consent of CytRx. Subject to the
foregoing, the Agreement shall be binding upon the successors and assigns of
each party.
4
<PAGE> 5
4.7 The spirit of the Agreement is that both parties will make every
effort to reside in harmony in the facilities including, but not limited to, the
following: (a) bulk purchasing of office supplies; (b) reasonable sharing of
equipment; and (c) routine communication regarding each company's strategic
plans.
4.8 The Agreement sets forth and constitutes the entire agreement
between the parties with respect to the subject matters and supersedes any and
all prior agreements, understandings, promises, and representations made by
either party to the other concerning the subject matter hereof and the terms
applicable hereto. The Agreement may not be released, discharged, amended, or
modified in any manner except by an instrument in writing signed by duly
authorized representatives of Vaxcel and CytRx.
IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed by an officer thereunto duly authorized as of the date first above
written.
CYTRX, CORPORATION.
By: /s/ Jack L. Luchese
------------------------------
VAXCEL, INC.
By: /s/ Paul J. Wilson
------------------------------
5
<PAGE> 1
EXHIBIT 10.16
VAXCEL, INC.
1993 STOCK OPTION PLAN
1. PURPOSE
The purpose of this Plan is to promote the interest of Vaxcel, Inc.
(the "Company") by granting Options to purchase Stock to Key Employees,
Consultants and Non-employee Directors in order (1) to attract and retain Key
Employees, Consultants and Nonemployee Directors, (2) to provide an additional
incentive to each Key Employee, Consultant and Non-employee Director to work to
increase the value of Stock and (3) to provide each Key Employee, Consultant and
Non-employee Director with a stake in the financial future of the Company which
corresponds to the stake of each of the stockholders of the Company.
2. DEFINITIONS
Each term set forth in this Section 2 shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular.
2.1. Board -- means the Board of Directors of the Company.
2.2. Code -- means the Internal Revenue Code of 1986, as amended.
2.3. Committee -- means the committee described in Section 5 which
shall administer this Plan.
2.4. Company -- means Vaxcel, Inc., a Delaware corporation, and any
successor to such corporation.
2.5. Consultant -- means any consultant of the Company or Subsidiary.
2.6. Conversion Date -- means the last day of the third month following
the date of the termination of employment of a Key Employee.
2.7 Extraordinary Transaction -- means the transactions described in
the definition of "Extraordinary Transaction" in Section 15 herein.
2.8. Fair Market Value -- means
(a) for Stock which is not readily tradable on an established
securities market, the price at which a share of Stock might change hands
between a willing buyer and a willing seller, neither being under any compulsion
to buy or to sell and both having knowledge of the relevant facts, which price
shall be determined by the Committee in
<PAGE> 2
good faith utilizing generally accepted methods of valuing stock which is not
readily tradable on an established securities market or a determination made by
one or more than one independent analyst experienced in preparing valuations of
stock which is not readily tradable on an established securities market;
(b) for Stock which is readily tradable on an established
securities market;
(1) if such Stock is traded in the over-the-counter
market, (i) the closing bid price of a share of Stock in the over-the-counter
market (as reported by the National Association of Securities Dealers Automatic
Quotation System or such other national quotation service as selected by the
Committee) for the day on which such value is to be determined, or, if no shares
of Stock were traded on such day, (ii) such closing bid price for the
immediately preceding day on which shares of Stock were traded, or,
(2) if Stock is not regularly traded in the
over-the-counter market but is registered on a national securities exchange, (i)
the closing price of a share of Stock on such national securities exchange (as
reported by the National Quotation Bureau, incorporated or such other national
quotation services as selected by the Committee) for the day on which such value
is to be determined or, if no shares were traded on such day (ii) such closing
price as determined for the immediately preceding day on which shares were so
traded, or,
(3) if the price quotation described in (1) or (2) of
this Section 2.8(b) is unavailable, the price as determined in good faith by the
Committee in accordance with Section 2.8(a).
In no event shall Fair Market Value be less than the par or stated
value of the Stock subject to an Option.
2.9. ISO -- means an option granted under this Plan to purchase Stock
which satisfies the requirements of Section 422 of the Code.
2.10. Key Employee -- means any employee or officer of the Company or
any Parent Corporation or Subsidiary who, in the judgment of the Committee
acting in its absolute discretion, is a key to the success of the Company or
such Parent Corporation or Subsidiary.
2.11. Non-employee Director -- means a member of the Board who is not a
full-time employee of the Company.
2.12. Non-ISO -- means an Option granted under this plan to purchase
Stock which fails to satisfy the requirements of Section 422 of the Code.
2.13. Option -- means an ISO or Non-ISO.
- 2 -
<PAGE> 3
2.14. Option Agreement -- means the written agreement or instrument
which sets forth the terms of an Option granted to a Key Employee, Consultant or
Non-employee Director under this Plan.
2.15. Option Price -- means the price which shall be paid to purchase
one share of Stock upon the exercise of an Option granted under this Plan.
2.16. Parent Corporation -- means any corporation which is a parent of
the Company within the meaning of Code Section 424(e).
2.17. Plan -- means this 1993 Stock Option Plan, as amended from time
to time.
2.18. Predecessor Corporation -- means any corporation which is a
predecessor corporation (within the meaning of Section 422(b)(7) of the Code) of
the Company, any Subsidiary or Parent Corporation.
2.19. Stock -- means the common stock of the Company.
2.20. Subsidiary -- means any corporation which is a subsidiary
corporation (within the meaning of Code Section 424(f)) of the Company.
2.21. 10% Stockholder -- means a person who owns (after taking into
account the attribution rules of Code Section 424(d)) more than 10% of the total
combined voting power of all classes of stock of either the Company, a
Subsidiary or a Parent Corporation at the date of grant to such Stockholder of
an ISO.
2.22. 34 Act -- means the Securities Exchange Act of 1934, as amended.
3. SHARES SUBJECT TO OPTIONS
There shall be 1,000,000 shares of Stock reserved for use under this
Plan, and such shares of Stock shall be reserved to the extent that the Company
deems appropriate from authorized but unissued shares of Stock and from shares
of Stock which have been reacquired by the Company. Furthermore, any shares of
Stock subject to an option which remain after the cancellation, expiration or
exchange of such Option thereafter shall again become available for use under
this Plan.
4. EFFECTIVE DATE
The effective date of this Plan shall be June 1, 1993.
5. COMMITTEE
- 3 -
<PAGE> 4
This Plan shall be administered by the Committee which shall consist of
not less than two members of the Board who are appointed by the Board and
(a) if the Company is not subject to the 34 Act, a member of
the Committee may be a Key Employee and may be granted Options under this Plan,
but no such member shall vote on whether an Option shall be granted to such
member and, if an Option is so granted, no such member shall determine the terms
and conditions of such Option, or
(b) if the company is subject to the 34 Act, the members
individually and collectively shall satisfy the requirements for a disinterested
committee under Rule 16b-3 under the 34 Act. The Committee acting in its
absolute discretion shall exercise such powers and take such action as expressly
called for under this Plan and, further, the Committee shall have the power to
interpret this Plan and (subject to Sections 12, 14 and 15) to take such other
action in the administration and operation of this Plan as the Committee deems
equitable under the circumstances, which action shall be binding on the Company,
on each affected Key Employee or Non-employee Director and on each other person
- -directly or indirectly affected by such action.
6. ELIGIBILITY
Only Key Employees, Consultants and Non-employee Directors shall be
eligible for the grant of options under this Plan. Key Employees shall be
eligible to receive ISOs or Non-ISOs. Consultants and Non-employee Directors
shall be eligible to receive Non-ISOs only.
7. GRANT OF OPTIONS
(a) Option Grants to Key Employees and Consultants. The
Committee acting in its absolute discretion shall grant Options to Key Employees
and Consultants under this Plan from time to time to purchase shares of Stock
and, further, shall have the right to grant new Options in exchange for the
surrender and cancellation of outstanding Options. Each grant of an Option shall
be evidenced by an Option Agreement, and each Option Agreement shall incorporate
such terms and conditions as the Committee acting in its absolute discretion
deems consistent with the terms of this Plan including, without limitation,
(1) conditions limiting the exercise of the Option to
installments over a period set by the Committee which does not exceed the term
of the option,
(2) conditions limiting the exercise of the Option if
there is a failure to meet specified performance goals,
(3) a right of first refusal in favor of the Company
for shares of Stock purchased pursuant to the exercise of the Option,
- 4 -
<PAGE> 5
(4) employment restrictions which, if violated, grant
the Company the right to repurchase shares of Stock purchased pursuant to the
exercise of the Option, provided, if the Committee grants an ISO and Non-ISO to
a Key Employee on the same date, the right of the Key Employee to exercise or
exchange one such option shall not be conditioned on such employee's failure to
exercise or exchange the other such option, and
(5) conditions permitting, under certain
circumstances, conversion of ISOs into Non-ISOs.
(b) $100,000 ISO Limit. The Committee may grant an ISO to a
Key Employee during any calendar year. However, if the aggregate Fair Market
Value (determined at the time the ISO is granted) of the Stock with respect to
which such ISO is exercisable for the first time by the Key Employee during any
calendar year (under all stock option plans of the Company, its Parent
Corporation, if any, and Subsidiary) exceeds $100,000, then such ISO, to the
extent of such excess, shall be treated for all tax purposes as a Non-ISO.
(c) Option-Grants to Non-employee Director. Each Nonemployee
Director shall receive a Non-ISO to purchase up to 5,000 shares of Stock on the
date of each annual meeting of stockholders at which such person is elected to
the Board. The Option Price of such Non-ISO shall equal the Fair Market Value of
a share of Stock on the date of grant, and such Non-ISO shall become
exercisable, with respect to 33% of the Stock underlying the Non-ISO, on each
anniversary following the date of grant. Notwithstanding any other provision of
the Plan, this subsection may not be amended more than once every six months,
except for amendments necessary to conform the Plan to changes in the provisions
of or the regulations relating to the Code or the Employee Retirement Income
Security Act of 1974.
8. OPTION PRICE; METHOD OF PAYMENT
The Option Price for each share of Stock subject to a Key Employee or
Consultant Option shall be no less than the Fair Market Value of a share of
Stock on the date the Option is granted, provided, if the Key Employee or
Consultant is a 10% Stockholder as determined immediately before such Option is
granted, the Option Price shall not be less than 110% of Fair Market Value of a
share of Stock on the date such Option is granted. The Option Price of a Non-ISO
granted to a Non-employee Director shall be determined in accordance with
Section 7(c) of this Plan. The Option Price for any Option granted under the
Plan shall be payable in full upon the exercise of any Option. An Option
Agreement may provide for the payment of the Option Price either in cash or in
Stock or in any combination of cash and Stock so long as the consideration
tendered is equal to the aggregate Option Price. Any payment made in Stock shall
be valued, for purposes of determining the Fair Market Value of such Stock on
the date the option is exercised.
- 5 -
<PAGE> 6
9. EXERCISE PERIOD
Each Option granted under this Plan shall be exercisable in whole or in
part at such time or times as set forth in the related Option Agreement, but no
Option Agreement shall make an Option exercisable before the date such option is
granted or after the earlier of
(1) the date such Option is exercised in full,
(2) the date which is the tenth anniversary of the date such
option is granted, if such Option is an ISO and the Key Employee is not a 10%
Stockholder,
(3) the date which is the fifth anniversary of the date such
Option is granted, if such Option is an ISO and the Key Employee is a 10%
Stockholder, or
(4) the date which is one day after the tenth anniversary of
the date such Option is granted, if such Option is a Non-ISO.
An option Agreement may provide for the exercise of an Option after the
termination of the employment, consulting relationship or service of a Key
Employee, Consultant or Non-employee Director, respectively, with the Company
for any reason whatsoever, including death or disability; provided, however,
that if the option Agreement is for an ISO, the Option Agreement shall provide
that the Key Employee must exercise such ISO (unless such Option Agreement
provides for the conversion of such ISO into a Non-ISO) within three months
after termination of employment. Notwithstanding the foregoing proviso, an
Option Agreement may allow the exercise of an option for up to one year
following the termination of employment or service due to total or permanent
disability (within the meaning of Code Section 22(e)(3) or up to six months
following termination of employment or service due to death while employed by or
serving as a director of the Company.
10. CONVERSION OF ISOs TO NON-ISOs
An Option Agreement may, if authorized by the Committee, contain a
provision to the effect that commencing with the expiration of the third month
following the date of termination of employment of a Key Employee, all vested
ISOs held by such Key Employee covered by such Option Agreement shall without
further action of the Company, become converted into an equal number of
Non-ISOs, which shall thereupon be exercisable to purchase Stock until the
earlier of (i) three months following the Conversion Date or (ii) such other
date determined by the Committee; provided, however, that such date shall in no
event be later than the expiration date of the ISO previously converted.
11. NONTRANSFERABILITY
- 6 -
<PAGE> 7
No option granted under this Plan shall be transferable by a Key
Employee, Consultant or Non-employee Director-other than by will or by the laws
of descent and distribution. An Option shall be exercisable during a Key
Employee, Consultant or Non-employee Director's lifetime only by the Key
Employee, Consultant or Nonemployee Director. The person or persons to whom an
Option is transferred by will or by the laws of descent and distribution
thereafter shall be treated as the Key Employee, Consultant or Non-employee
Director during the period such option is exercisable pursuant to the terms
thereof..
12. LIFE OF PLAN
No option shall be granted under this Plan on or after the earlier of
(a) the day preceding the tenth anniversary of the effective
date of this Plan in which event this Plan otherwise thereafter shall continue
in effect until all outstanding options have been surrendered or exercised in
full or no longer are exercisable, or
(b) the date on which all of the Stock reserved under Section
3 of this Plan (as a result of the exercise of options granted under this Plan)
has been issued or no longer is available for use under this Plan, in which
event this Plan also shall terminate on such date.
13. ADJUSTMENT
The number of shares of Stock reserved under Section 3 of this Plan and
the number of shares of Stock subject to Options granted under this Plan and the
Option Price of such Options shall be adjusted by the Committee in an equitable
manner to reflect any change in the capitalization of the Company, including,
but not limited to, such changes as stock dividends or stock splits provided,
that in the case of an ISO, such adjustments shall be limited to those necessary
to reflect stock dividends or stock splits. Furthermore, the Committee shall
have the right to adjust (in a manner which satisfies the requirements of Code
Section 424(a)) the number of shares of Stock reserved under Section 3 of this
Plan and the number of shares subject to Options granted under this Plan and the
Option Price of such Options in the event of any corporate transaction described
in Code Section 424(a) which provides for the substitution or assumption of such
Options. If any adjustment under this Section 13 would create a fractional share
of Stock or a right to acquire a fractional share of Stock, such fractional
share shall be disregarded and the number of shares of stock reserved under this
Plan and the number subject to any options granted under this Plan shall be the
next lower real number. An adjustment made under this Section 13 by the
Committee shall be conclusive and binding on all affected persons and, further,
shall not constitute an increase in the number of shares reserved under Section
3 within the meaning of Section 16(a) of this Plan.
14. SECURITIES REGISTRATION
- 7 -
<PAGE> 8
Each Option Agreement shall provide that, upon the receipt of shares of
Stock as a result of the exercise of an Option, the Key Employee shall, if so
requested by the Company, hold such shares of Stock for investment and not with
a view of resale or distribution to the public and, if so requested by the
Company, shall deliver to the Company a written statement satisfactory to the
Company to that effect. The Company in its absolute discretion and at its own
expense may take such action, if any, as it deems necessary or appropriate to
register under the Securities Act of 1933 or under any other applicable
securities laws, the issuance of the shares of Stock reserved or issued under
this Plan or to qualify such share of Stock for an exemption under, or exclusion
from, any such laws prior to the issuance of such Stock; however, the Company
shall have no obligation whatsoever to take any such action in connection with
the transfer, resale or other distribution of such Stock by a Key Employee.
15. SALE OR MERGER OF THE COMPANY
If (i) the Company agrees to sell substantially all of its assets for
cash or property or for a combination of cash and property, (ii) the Company
agrees to any merger, consolidation, reorganization, division or other corporate
transaction in which Stock is or will be converted into another security or into
the right to receive cash, property or securities, or (iii) a change in control
of the Company occurs, which for purposes of this section is deemed to occur if
any "person" (as such term is used in Section 13(d) of the Securities Exchange
Act of 1934) is or becomes the "beneficial owner" (as such term is used in
Section 13d-3 of the Regulations promulgated under the Securities Exchange Act
of 1934), directly or indirectly, in any transaction or series of transactions
that has not been approved by the Board of (a) shares of Common Stock of the
Company representing 25% or more of the voting power of the then-outstanding
shares of Common Stock, (b) shares of any other class of security or any
combination of any securities of the Company then-outstanding representing 30%
of the combined voting power of such class or combination of securities which
has the power to elect a majority of directors of the Company (with each of the
events described in (i) through (iii) above constituting an "Extraordinary
Transaction"), then each option shall become immediately and fully vested and
immediately exercisable for Stock. In the event of any Extraordinary
Transaction, the Committee, in its discretion, may provide that outstanding
Options may be cancelled unilaterally by the Company in exchange for an amount
equal to (x) the same consideration each Key Employee and Non-Employee Director
otherwise would receive with respect to Stock subject to the option if such
Stock has been sold, surrendered, exchanged or otherwise in the Extraordinary
Transaction, less (y) the aggregate Option Price with respect to the Stock
subject to such option.
16. AMENDMENT OR TERMINATION
This Plan may be amended by the Committee from time to time to cause
Options intended to qualify as ISOs to qualify as such under the Code, or for
other purposes, to
- 8 -
<PAGE> 9
the extent that the Committee deems necessary or appropriate provided, however,
no such amendment shall be made absent the approval of the stockholders of the
Company
(a) to increase the number of shares reserved under Section 3,
(b) to extend the maximum life of the Plan under Section 12 or
the maximum exercise period under Section 9,
(c) to decrease the minimum Option Price under Section 8,
(d) to change the class of participants eligible for Options
under Section 6 or to otherwise materially modify (within the meaning of Rule
16b-3 promulgated under the 34 Act) the requirements as to eligibility for
participation in this Plan or
(e) to otherwise materially increase (within the meaning of
Rule 16b-3 of the 34 Act) the benefits accruing under this Plan.
The Committee also-may suspend the granting of Options under this Plan at any
time and may terminate this Plan at any time, provided, however, the Company
shall not have the right to modify, amend or cancel any Option granted before
such suspension or termination unless the Key Employee, Consultant or
Non-employee Director consents in writing to such modification, amendment or
cancellation or there is a dissolution or liquidation of the Company or a
transaction described in Section 13 or Section 15 of this Plan.
17. MISCELLANEOUS
17.1. No Stockholder Rights. No Key Employee, Consultant or
Non-employee Director shall have any rights as a stockholder of the Company as a
result of the grant of an Option to such person under this Plan or the exercise
or surrender of such option pending the actual delivery of Stock subject to such
option.
17.2. No Contract of Employment. The grant of an Option to a Key
Employee, Consultant or Non-employee Director under this Plan shall not
constitute a contract of employment and shall not confer on a Key Employee any
rights upon such employee's termination of employment in addition to those
rights, if any, expressly set forth in the Option Agreement which evidences such
employee's Option.
17.3. Withholding. The grant, acceptance, exercise or surrender of any
Option granted under this Plan shall constitute full and complete consent by the
Key Employee, Consultant or Nonemployee Director to whatever action the
Committee deems necessary to satisfy any federal and state tax withholding or
reporting requirements, if any, which the Committee in its discretion deems
applicable to such grant, acceptance, exercise or surrender. In furtherance and
not in limitation of the foregoing, the following shall apply:
- 9 -
<PAGE> 10
(a) Non-ISOs. Whenever Stock is to be delivered upon exercise
of a Non-ISO, the Company shall be entitled to require as a condition of
delivery that the Key Employee, Consultant or Nonemployee Director remit to the
Company an amount sufficient to satisfy the Company's federal, state and local
withholding tax obligations with respect to the exercise of the Option.
(b) ISOS. The acceptance of Stock upon exercise of an ISO
shall constitute an agreement by the Key Employee (unless and until the Company
shall notify the Key Employee that it is relieved,' in whole or in part, of its
obligations under this Section 17.3 (b)) (i) to notify the Company if any or all
of such Stock is disposed of by the Key Employee within two years from the date
the Option was granted or within one year from the date the Stock was
transferred to the Key Employee pursuant to the exercise of the Option by such
Key Employee, and (ii) to remit to the Company, at the time of any such
disposition, an amount sufficient to satisfy the Company's federal, state and
local withholding tax obligations with respect to such disposition, whether or
not, as to both (i) and (ii) , the Key Employee is in the employ of the Company,
at the time of such disposition.
17.4. Governing Law. The provisions of this Plan shall be governed and
construed in accordance with the laws of the State of Georgia, provided,
however, that in the case of the provisions applicable to ISOS, such provisions
shall (to the extent possible) be construed in a manner conforming to and
consistent with the requirements of Code Section 422.
- 10 -
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS OF VAXCEL, INC.
We consent to the references to our firm under the captions "Selected
Historical Financial Data of Vaxcel" and "Experts" and to the use of our
report dated February 19, 1996, in this Registration Statement and related
Prospectus of Vaxcel, Inc. dated December 31, 1996.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
December 30, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Form S-4 Registration Statement of our report dated
February 28, 1996 included in Zynaxis Inc.'s Form 10-K/A-1 for the year ended
December 31, 1995 and to all references to our Firm included in this
Form S-4 Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
December 30, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VAXCEL, INC. CONTAINED ELSEWHERE IN THIS REGISTRATION
STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> SEP-30-1996 DEC-31-1995
<CASH> 18832 515522
<SECURITIES> 0 0
<RECEIVABLES> 6363 5038
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 264801 261894
<DEPRECIATION> 156725 118025
<TOTAL-ASSETS> 168945 701868
<CURRENT-LIABILITIES> 55089 117699
<BONDS> 0 0
0 0
0 0
<COMMON> 8200 8000
<OTHER-SE> 105656 576169
<TOTAL-LIABILITY-AND-EQUITY> 168945 701868
<SALES> 0 0
<TOTAL-REVENUES> 87094 718707
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 857407 1557512
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (770313) (1378805)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (770313) (1378805)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (770313) (1378805)
<EPS-PRIMARY> (.10) (.17)
<EPS-DILUTED> (.10) (.17)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
ZYNAXIS, INC.
The undersigned hereby constitutes and appoints Martyn D. Greenacre and
Michael A. Christie, or either of them, as proxies, each with full power of
substitution, to vote the number of shares of capital stock of Zynaxis, Inc.
("Zynaxis") which the undersigned would be entitled to vote if personally
present at the Special Meeting of Zynaxis Shareholders to be held at 371
Phoenixville Pike, Malvern, Pennsylvania 19355, at ___ _.M., local time, on
March __, 1997, and at any adjournment or postponement thereof (the "Special
Meeting") upon the proposals described in the Proxy Statement/Prospectus and
the Notice of Special Meeting of Shareholders, both dated February __, 1997,
the receipt of which is acknowledged in the manner specified below.
1. CHARTER AMENDMENT. To consider and vote upon the approval of an
amendment to the Amended and Restated Articles of Incorporation of Zynaxis to
make Subchapter 25E of the Pennsylvania Business Corporation Law of 1988, as
amended ("PBCL"), inapplicable to Zynaxis (the "Charter Amendment").
A copy of the Charter Amendment is more fully described in Appendix C to the
accompanying Proxy Statement/Prospectus and is hereby incorporated by reference
herein.
FOR / / AGAINST / / ABSTAIN / /
2. MERGER. To consider and vote upon a proposal to approve an Agreement
and Plan of Merger and Contribution (the "Agreement"), dated as of December 6,
1996, by and among Zynaxis, CytRx Corporation ("CytRx"), Vaxcel, Inc.,
("Vaxcel") a Delaware corporation and a wholly owned subsidiary of CytRx, and
Vaxcel Merger Subsidiary, Inc. ("Vaxcel Merger Sub"), a Georgia corporation and
a newly-formed, wholly-owned subsidiary of Vaxcel, which provides for the
merger (the "Merger") of Zynaxis with Vaxcel Merger Sub, with the effect that
Zynaxis will be the surviving corporation resulting from the Merger, and will
continue to conduct its business and operations as a wholly-owned subsidiary of
Vaxcel. A copy of the Agreement is set forth in Appendix A to the accompanying
Proxy Statement/Prospectus.
FOR / / AGAINST / / ABSTAIN / /
3. ASSET SALES. To consider and vote upon a proposal to approve the sale
of substantially all of the assets of Zynaxis ("Asset Sales") as contemplated
by the Liquidation Agreement, pursuant to which CytRx will serve as Zynaxis'
agent and assist Zynaxis in conducting the Asset Sales prior to the Merger.
A copy of the Liquidation Agreement is set forth in Appendix B to the
accompanying Proxy Statement/Prospectus.
FOR / / AGAINST / / ABSTAIN / /
4. In their discretion the Proxies are authorized to vote upon such other
business or may properly come before the Special Meeting.
FOR / / AGAINST / / ABSTAIN / /
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3 ABOVE.
<PAGE> 2
Please sign exactly as name appears below. When shares are held jointly,
both should sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation, please sign
in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
DATED: ____________________, 1997
___________________________________________
Signature
___________________________________________
Signature if held jointly
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
ZYNAXIS, INC.,
AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
